Located just over 100 miles from Key West, the Republic of Cuba, part of the West Indies, lies in the northern part of the Caribbean islands. A popular tourist destination for Americans in the 1950s, Cuba has been blocked to American travelers and investors for almost 60 years after a revolution and later partnership with the former Soviet Union caused ties with the U.S. to deteriorate. However, a cooling of tensions and easing of restrictions are about to heat things up on the former Spanish island nation and the property market could become the hottest in the region.
White sandy beaches, beautiful turquoise blue water, incredible food, colorful Spanish colonial buildings, 1950s American cars and a rich cultural history, make Cuba an attractive place to visit. For many that’s all they can do, however this may be about to change. Since 2011, local Cubans have been allowed to buy and sell real estate. Brought on by an evolving economic climate, President Raul Castro changed the system from a swap-only process.
It is important to note that the rules are rapidly moving, however as it stands foreign investors are only able to purchase property in one of three scenarios:
1. Marrying a Cuban
2. Investing in a Cuban corporation which is registered with the Chamber of Commerce
3. Purchasing a property from a foreign owner directly
Item three may sound contradictory, as how can a non-resident purchase property from another non-resident, if a non-resident can’t own property in the first place? For a short time in the early 1990s Cuban law permitted foreign investors the right to purchase condominiums. Those that purchased are now able to sell their properties. There are not currently many on the market and those that are offer a steep increase in price over similar property available only to local buyers. For instance, according to numbeo.com, the average price per sq. ft. in Havana ranges from $33.92 – $45.73. However, a studio apartment for sale and available to foreign investors is priced at $105,000. That’s a whopping $304 per sq. ft.
There are further caveats however: a 99-year lease is in place as all land remains government property. Whether this will have a serious impact on future buyers is yet to be seen. Also, there’s always the risk the government could change the laws or stop some new developments from being built.
There were a number of new golf course developments in the works by overseas companies such as The Coral Capital Group and Standing Feather International. These have since stopped after lengthy court cases and company closures. Although Fidel Castro once said that golf was for the “bourgeois”, it seems that the game may play a pivotal role in the seeking of foreign investment on the island. Wealthy foreign travelers and investors want to be on or near a golf course.
Speaking with David Thorpe, a British businessman who has been traveling to Cuba for the past 18 years, “Cuba has changed a lot since my first trip in 1998. The future hotspot will be near Havana at first, a small town called Guanabo on the coast. It is my number one choice and in 20 years it will be full of new hotels.”
As expected and with its pros and cons to locals, many large American hotel chains are biting at the bit to enter the market. First Starwood have stated that they are entering Cuba. Airbnb and Marriott are also following suit. It’s been nearly 60 years since the last American hotel company operated there. Eventually, hotel chains will open residences as they have in many other destinations. New jobs, facilities and opportunities will raise the economy and spending power of locals. However, the Cuba that people enjoy and see today will risk the chance of being lost forever.
The obstacles that stand in the way
At the end of March, President Obama became the first U.S. President to visit the country in 90 years. A huge milestone. However, with the two countries finally talking again, there’s still a long way to go before the embargos can be lifted. In fact, more than 6,000 claims are still outstanding by U.S. corporations and individuals. As for Cuba, they state that the U.S. owes them around $302 billion. It goes even further if Cuba were to pay the U.S. back around the $8 billion that is said to be owed, it may re-open the door to Cubans making claims through Spain.
Many courts in Spain still do not recognize the original debt settlement deal signed between Spain and Cuba and find it to be invalid. In the 1950s when the new Cuban government took control of all land in Cuba, only about 5% was said to be American land. The rest was Cuban and at the time, most Cubans had parents or grandparents from Spain. This allowed them to make claims against Cuba through Spanish courts. Thus, the amount owed would dwarf the debt to the U.S. Barcelona-based company, Compañía de Recuperaciones Patrimoniales en Cuba, is currently signing claimants up to assist in the recovery of seized property.
Property markets in Cuba are not expected to rise dramatically from the ashes in the immediate future. There’s an incredible amount of red tape and legal infrastructure that needs to be removed and set rolling before the place can really change. 2018 will also bring in new leadership, potentially the first leader who was not part of the revolution. The world’s eyes are re-aligned at Cuba and there’s an optimism that for the first time in more than half a century, light may be at the end of the tunnel.
This article was first published in Palace magazine.