Wednesday, April 3, 2013

Havana real estate market

If you want to get a sense of Cuba’s real estate market, you can read this great roundup by Reuters or you can do what I did one day last month, which was to go stand in the Paseo del Prado on a Saturday morning and experience the market first-hand.

There, Cubans used to congregate to arrange permutas, the swaps that were the only legal option before residential real estate sales were legalized.

Now things are busier than before and with no effort at all you meet buyers and sellers, learn about their prices, their strategies, and the market forces behind the reacomodo in the housing market that the government predicted would occur.  There are even brokers who charge sellers a few percentage points of the sale price when they find a buyer.


Pozos Real Estate said...

It was nice to read your post.and nice to know about Cuban and your real estate as well.I am sure other readers will also like it

Anonymous said...

Allowing people to rent, buy and sell property at freely negotiated prices was a step forward that eased the severe housing shortage but a rapid solution will not occur since the real estate market is rudimentary at best.

In a fully developed real estate market private individuals would be allowed to:
1- Own land and the buildings constructed on it.
2- Buy, sell or rent their land and space in the buildings at freely negotiated market prices.
3- Make contracts with private construction companies to build their buildings for them at freely negotiated market prices.
4- Buy and sell construction materials in unlimited quantities without unnecessary waiting time at freely negotiated market prices.
5- Produce and import construction materials and sell them at freely negotiated market prices.

Since non of these conditions exist in Cuba, the reform measures are incomplete and will only ease partially the existing housing shortage because there is no feedback.

In other words the supply of housing is rigid and is not influenced by its scarcity as measured in the market value of houses and rents.

This happens because the production of construction materials and housing are set through planning and not through the possibility of making profits due to high housing prices, the scarcity can never be solved since the market never increases the supply of construction materials and housing.

Housing shortages are a natural part of centrally planned economies since:

1- Rents are set below the price levels necessary to equal the effective demand to available supply.

2- The enterprises in the construction sector cannot raise prices and set their production goals and therefore cannot attempt to maximize their profits.

Talk of a "real estate market: under Cuban conditions is an oxymoron!