Tuesday, April 26, 2011

Home sales on the horizon?

Raul Castro promised in 2007 the removal of “excessive prohibitions” that weigh on Cuban citizens.

His most notable moves to date have been the end of bans on Cubans staying in tourist hotels, having cell phone accounts, and importing certain electronic items. These could be dwarfed by the impact of a policy discussed at the Party Congress: to allow purchase and sale of residential property.

Many Cubans have title to their houses or apartments, but by law they cannot sell them in an open market. They can bequeath them to heirs or trade them with another homeowner (the famous permuta), after which lawyers complete the paperwork to transfer ownership.

The reality is a little different.

They do buy and sell homes, as this St. Petersburg Times article explains. On paper, the transaction is a swap. In reality, the swap is accompanied by a payment to compensate the owner who gives up the higher-value property. In cases where a seller finds a buyer but doesn’t want the buyer’s house, a chain of swaps is constructed with all the compensating payments so everyone gets what they want, and lawyers come in at the end to ensure that all have clear title.

Signs on houses all around Cuba advertise willingness to trade, and in Havana many trades are arranged Saturday mornings on the Paseo del Prado.

In this context, the idea that the Cuban government might permit normal home sales is revolutionary. The Lineamientos published last year called for “flexible formulas for the exchange, purchase, sale, and rental of housing, so as to facilitate solutions to the housing needs of the population.”

When the Party Congress met, one of the committees discussed the “acquisition of housing,” Granma reported. It said that the committee agreed “that the purchase and sale of same be established, and to make more flexible other forms of transmission of real property (trade, donation) between individuals, and also to speed up the procedures for remodeling, rehabilitating, construction, and renting, with the goal of facilitating solutions for public demand for housing.”

In his opening speech to the Congress, Raul Castro said that the “legal norms associated with the purchase and sale of housing” are “in an advanced phase.”

“Advanced phase” doesn’t tell us if the new policy will take effect next week or next year. And of course the details won’t be known until those “legal norms” are published.

But even if there are restrictions, an open market for housing would mark a dramatic change, an official realization that a too-heavy government hand exacerbates housing shortages, while more private activity will ease them.

So here are some questions and speculation.

First, creation of a normal market would overnight turn the houses of many thousands of Cubans into capital assets that they could use as collateral, convert to cash, improve and hold as an investment.

It’s safe to assume that there would be anti-speculation measures such as a ban on resale within a certain number of years.

One also assumes that outright foreign ownership will not be permitted, although perhaps long-term leases such as those discussed in the context of golf course residences for foreigners will be permitted.

Speaking of those golf courses, if foreign capital is brought in to build homes for foreigners in resorts, will foreign capital also be brought in to build homes that Cubans can purchase?

What do they mean by speeding up procedures for construction to help satisfy housing demand? Does that mean that Cuban citizens with land can subdivide a lot, then build and sell a house?

Cuba will be an unusual market. The price of housing will not be determined by local demand and purchasing power alone. Demand and prices will also be driven by people outside Cuba who give Cubans money to buy homes. A Miami gas station owner nearing retirement will send money to his brother in Havana to buy a house with extra rooms where he can stay during visits and live during retirement.

This is bad for those without that brother in Miami, and it means a large inflow of foreign capital for the Cuban economy – one more capital flow that comes from the Cuban-American community.

Finally, it could mitigate one of indignities of the salida definitiva, the status accorded to most Cuban emigrants, who have to give up their property before they depart. For some, allowing sale of property would make a difference.

This is all speculation until the policy is spelled out. We’ll watch. If someone has ideas about the market for cars, I’m all ears.


brianmack said...

Perhaps, this is a way to split the expatriate Cuban community in half.
You will have some who will invest in Cuba, via the sending of funds etc. vs. those who are staunchly against any monies sent to Cuba. The other factor to take into consideration, and I think it might well be the reason for the continuation of the "old guard" is how revolutionary this is. I never underestimate Cuba, it's people and most of all, those on this side of the border (USA)

Antonio said...

Great summary. Absolutely agree with you on foreign ownership.
I would also venture to guess that there will be greater restrictions/ bureaucratic hurdles on ownership in historic areas like Havana Vieja and upmarket areas like Miramar.

I also wonder what the new laws will do regarding abandoned and collapsed buildings, of which there are plenty in some pretty nice areas too.

Anonymous said...

I assume that buying and selling cars will be similar to what already happens with foreigners that are allowed to buy and sell cars.

The process is to go through an intermediary company (ususally Cimex - Division Automatriz) as follows:

1) The seller sells the car to Cimex who will pay an appraised value.
2) The seller takes the plates and the sales contract to the Policia Transito (DMV) and recieves a release form confirming the "baja" showing that they no longer own the car.
3) The seller takes the "baja" to Cimex to confirm they have handed in the plates and Cimex does what they do to take ownership.
4) A sales contract is arranged between the purchaser and Cimex and the car is paid for.
5) The purchaser takes the contract and other documents to the Policia Transito and obtains plates for the car.
6) The purchaser returns to Cimex with the plates to take possession.

The question is how does the seller get the price they want when Cimex pays a lower price. Currently the difference is exchanged under the table so the purchaser has to compensate the seller for the amount he wants.
Maybe the state will allow the seller/purchaser to set the price and the purchaser will have to pay Cimex before Cimex pays the seller, with Cimex taking a commission/tax.

I'm quite certain that cars will not be bought and sold directly between people. That would be a fundamental shift from the control structure they have over most transactions.