Amid Warmer Relations With The U.S., Cuba May Be The Next Brooklyn—Who Knew?
The lure of big real estate bucks is echoing a pre-revolutionary boom time in Old Havana.
Fidel Castro may still be warm in his grave but already the kind of Cuba he feared—the one modeled on unbridled western commercialism—is starting to boom, with real estate leading the charge.
According to NPR.com, prices have doubled in the last 2-3 years and demand for pre-revolutionary homes, preferably with a view of the shimmering Caribbean sea, is rampant. However, before you think about jetting off to Havana to grab a piece of the Cuban rum pie, it might be worth checking to see if you have any Cuban ancestry. If not, find some!
It only became legal to sell private homes in 2012—and Cuban law only allows residents to purchase them. Of course, that hasn’t stopped savvy investors from finding loopholes—putting the property in a Cuban “friend’s,” which usually include paying for the favor. The frenzy has been seized upon by Cuban expats, who fled the country after Fidel came to power—but still have family members there, in whose name they can place their new Caribbean second home. With real estate in Cuba selling for a fraction of what it does in other Caribbean countries, and diplomatic relations with the communist country reinstated, investing in the country, even with a third party’s help, could be worth a shot.
“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 Cuba, the pros and cons of communism live side by side. Most residents were either given their homes by the state, or took them over from family members who received them this way. Homes are now being passed from generation to generation. The high rents facing other urban centers are not a concern in Cuba—as residents rarely pay any. That said, the government aren’t giving out new houses, and as so few are being built, it’s not unusual for grown children to still be living with their parents. Oh, and don’t think about heading to a home improvement store to perform some fix-ups on your hundred year old home. Home Depot and Lowes have yet to make the 90-mile journey from Florida—and locals could never afford the materials needed to stay on top of their homes. Thus, don’t be surprised to see a gossamer of white plaster coalescing on the floor of your next Airbnb rental or a bucket doubling as a toilet if the plumbing is shot.
All this means Cuba’s property market is ripe for gentrification—with wealthy foreigners able to swoop in and buy property that locals can’t afford, eventually displacing them.
“I have a friend who rents rooms in her house to tourists,” Juanita Aldama, a government employee living in Old Havana told Thompson Reuters Foundation 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.”
Although Aldana only earns the equivalent of $35 a month working at a museum, she inherited her home from her husband, so she lives rent-free and gets subsidized food and other benefits. With development still in its infancy and major hotel chains yet to take hold, Cuba’s 11 million citizens hosted over 3.5 million tourists last year—a 17 percent increase on the year before.
Buying cheap and living amid warm skies and cobalt seas with a steady Airbnb rental income may be the dream for many an overseas investor burned out from the rat race—but Cuba comes with its risks. Rules and regulations are as hazy as a humid day in Beijing, there is no such things as title insurance and who’s to say that the Cuban government won’t reverse existing private property laws? That’s before we get into the unreliable water supply, weak infrastructure, crumbling roads and shoddy plumbing. Then again, no one said that making money was easy.
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