Cuba on the verge of illegal property boom as foreign cash tiptoes in

by Chris Arsenault | @chrisarsenaul | Thomson Reuters Foundation
Wednesday, 27 January 2016 13:36 GMT

A women looks old from her balcony in old Havana with a for sale sign below her apartment. Cuba’s government does not keep formal statistics on how many properties are being sold, but estate agents say more foreign capital is entering the market. Thomson Reuters Foundation/Chris Arsenault

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If the trickle of capital into Cuban property turns into a flood, will locals be priced out of their own neighborhoods?

By Chris Arsenault

HAVANA, Jan 27 (Thomson Reuters Foundation) - Business is buzzing at the estate agent's office in Havana's once-posh Vedado district, as foreign capital dips its toe in the island's property market following the warming of relations with the United States.

It's still illegal for foreigners to buy homes in Cuba, the island state ruled by a communist government since the 1959 revolution, unless they are permanent residents.

But that isn't stopping realtors from doing brisk business with non-Cuban clients in a nation where the black market has long provided a lifeline for entrepreneurs.

"Is it OK if I put it in my Cuban friend's name when closing the deal?" I ask the casually dressed agent scrolling through lists of low-priced homes and apartments in the capital's historic centre.

"Yes that's fine, many people are doing it," she says, drawing my attention to a three-bedroom top-floor suite with a rooftop garden in the heart of the city, selling for less than $70,000 - considerably less than one would pay for a similar property in other Latin American capitals, especially one just 90 miles (140 kms) from Miami.

You can buy an apartment for less than $15,000 in working-class districts of Havana, and prices are even lower in rural areas, residents said.

It only became legal to sell private homes in 2012, as part of a government plan to boost investment and economic growth.


The government does not publish numbers on property price movements, but valuations are rising quickly in parts of Havana popular with foreigners, the estate agent said.

Much of the money moving into the property market is from Cuban exiles, who send remittances to family members or friends and register the properties in their name, she said.

The residential property market operates in a legal grey zone, so contracts for foreign investors are difficult to enforce.

"Legally, foreigners who use a Cuban contact as the official purchaser have no guarantee their Cuban friend will respect the arrangement," says John Kirk, a professor at Dalhousie University in Canada who studies Cuba.

"That said, I know of several 'arrangements' that have been made, with investors looking at potential gains if the Cuban legislation is changed," Kirk told the Thomson Reuters Foundation.

"Given the increased U.S. interest in things Cuban, this is understandable, but it remains a major risk."

In old Havana, waiters and street vendors gossip about aspiring property tycoons who bought early and have had big returns.

A newly restored top-floor three-bedroom apartment overlooking the restaurants and fountains of Plaza Veija sold for $45,000 eight years ago and is now valued at more than $200,000, one waiter said - numbers that could not be verified.

For now, most locals don't seem worried about being priced out of their own neighborhoods, as the market is still in its infancy and the desire for foreign currency is strong among homeowners looking to sell.

But don't expect U.S. television networks to launch Flip This House, Havana any time soon.


Most residents were given their homes by the state, or took them over from family members who received them this way, and homes are now passed from generation to generation.

Residents say almost no one pays rent, though it's not uncommon for men in their 30s to live with their parents as they can't afford to buy, and the state hasn't been giving away new units because very few new homes are being built.

Residents pay a small tax on their property and are responsible for the upkeep.

Most of the crumbling buildings were built before the revolution and need serious repairs, and homeowners on government salaries often need to save for years to buy new tiles, bricks and plaster.

Juanita Aldama, a government employee living in old Havana, has been working with her son to fix the bathroom of her apartment, in a building that pre-dates the 1959 revolution.

She earns the equivalent of $35 a month working at a museum, and inherited her home from her husband, so she lives rent free and gets subsidized food and other benefits.

For now she isn't complaining, but she is worried the changes Cuba's economy is experiencing could eventually leave people like her behind.

"I have a friend who rents rooms in her house to tourists," Aldama said in an interview at her home. "She makes more from one night of rental income than I do in a month, and this is going to get worse."

Her friend received money from relatives in Miami to set up her rental property, connections which Aldama and hundreds of thousands of others don't have.


With 11 million citizens, Cuba hosted more than 3.5 million tourists last year, up more than 17 percent from 2014, and the government hopes for further increases as more Americans flock to the island.

Some visitors will enjoy a cigar, take a walk along the seafront, return to their hotel or cruise ship and head for home. But foreigners who want to settle here for the long term face a legal grey area if they try to buy property.

If the trickle of capital into Cuban property turns into a flood, residents like Aldama may start to resent their wealthy foreign neighbors buying up much of the prime real estate.

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Cuba on the verge of illegal property boom as foreign cash tiptoes in

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