Saturday, May 29, 2010
Who wouldn't want to own a piece of this?
Dear Reader,
I've read countless articles this year on Cuba's potential as the next property hotspot. Some imply that lifting travel restrictions on American tourists will kick start a rise in property prices. They'll fall for Havana's faded charms, or the beautiful Caribbean beaches, and want a piece for themselves.
It's not that simple. Two hurdles stand in the way of a real estate boom here (three if you include the need for a stable, democratically elected government). Allowing American tourists in won't make a difference to the country's property market.
In fact, tourist numbers hit an all-time high this year. This country's a mainstream destination for Canadians and Europeans. Cuba received more than a million tourists in the first four months of 2010. That's double the number during the same period in 2009. Tourism minister Manuel Marrero released the figures at a tourism fair in Havana this month. He also spoke about government plans to boost real estate development, and specifically tourism amenities--marinas, spas, and golf courses.
Foreign developers would happily build marinas, golf courses and hotels, along with residential property, in Cuba. And that's where the first hurdle comes in. Cuba prohibits foreign property ownership. Foreign developers are asking for long-term leases on land instead. The government granted leases on a small number of condos built by foreign companies in the 1990s, most of which sold to overseas owners. Getting those leases, and development approvals, is not exactly easy, despite the tourism ministry's enthusiasm. Since 2007, eleven foreign corporations put forward proposals for golf course developments. Three years on, none has moved forward.
Britain's Escencia Hotels and Resorts announced in June 2008 that the tourism ministry had approved their plans for a luxury €350 million project, with a golf course, 800 condos and 100 luxury villas. Almost two years later, they don't have a start date. They still need approval from twenty more ministries before they can move ahead.
So...foreigners can't own property...but what about the locals? Cubans can't buy or sell property, either: only the state can do that. Cubans can own and swap property. Officially, no money changes hands. Unofficially...that's another story. Paying thousands of dollars when swapping a smaller property for a larger or better-located one is commonplace.
The second hurdle here is uncompensated property owners. The US government recognizes 5,900 claims for American-owned properties seized in the 1960s. Cuba recognizes those claims, too. Cuba has already settled claims from other countries. Only the US claims remain, and they could total up to $7 billion, with interest. Large corporations would prefer investment incentives as compensation, but many individual owners want their family property returned to them.
If those owners get compensation, and Cuba grants the right to buy and sell property privately (to locals and foreigners alike), then the real estate market here could boom. Cuba certainly has potential. It's the ultimate early-in destination, waiting for an influx of foreign buyers. But for now, we're waiting for the hurdles to come down. And nobody knows how long that could take.
Margaret Summerfield
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