With Fidel Castro in retirement and rumours that America’s presidential elections could lead to a softening of the US embargo, is now the time to buy in Cuba, one of the cheapest Caribbean islands?
It sure is, say Peter Conradi and Anna Mikhailova in The Sunday Times. The government, determined to expand Cuba’s £1bn-a-year tourist industry, is set to build nine golf resorts with residential property for sale at each of them. Work on the first one is due to start in May, with off-plan properties going on sale in November. Prices are expected to start from £70,000. “Considerably cheaper than elsewhere in the Caribbean,” say Conradi and Mikhailova.
But there are plenty of reasons why property is cheap in Cuba. It is still a Communist country, for a start – and as such, the laws on private property ownership are complicated. Cubans are allowed to own their own property and most do. But they are not allowed to buy or sell property. They can only ‘swap’ – although money usually unofficially changes hands in these deals. As for foreigners, they are allowed to buy property in the new developments, but as yet only 75-year leases will be sold, rather than freeholds. The developers insist property rights are safe, but in a country like this, which is undergoing big changes, laws can easily change.
Another problem with buying property in Cuba is who is going to buy it from you when you want to cash in? The developments are being marketed at Europeans and Canadians, but with the era of cheap flights under threat, the country’s isolation could put off investors. Developers are also hoping to appeal to Americans, says The Sunday Times. But with US law banning citizens from travelling to Cuba, or buying property there, it is hard to believe many Americans are going to go to the trouble of circumnavigating the law when they can buy elsewhere with far less hassle. Anyway, most Americans are not in a position to be shopping for holiday homes at the moment anyway.
Finally, Cuba is slap-bang in the middle of Hurricane Alley, meaning it is regularly pummelled by ferocious storms during hurricane season. Already this year, the island has suffered substantial damage at the hands of Hurricanes Ike and Gustav, with hundreds of properties destroyed – rough estimates put the cost of damage at between $3bn and $4bn. So every year you will have to keep your fingers crossed that your investment survives the season.
All in all, lovely as it may be for the occasional holiday, we’d give property ownership in Communist Cuba a miss.
A week in the property market
• Asking prices have fallen 1% in the past month, according to the Rightmove House Price Index, leaving the average house asking price at £227,438, down 3.3% in the past year.
• An £11m property has been repossessed by Barclays Bank in what the Council of Mortgage Lenders (CML) says is the highest value repossession ever seen in Britain. The six-bedroom house in Holland Park, London, belonged to City banker Robert Bonnier who bought it last year. He had planned to add a swimming pool, cinema and wine cellar to the property, with the aim of reselling it for £15m.
• The number of people opting to rent has soared in the past year, according to Your Move. The number of leases taken out in August was 65% up on August 2007. Yet rents are not rising, as increased demand is being met by supply as sellers opt to rent out their properties rather than drop their selling price.
• Mortgage lending hit new lows in August, with mortgage approvals from the major banks 64% lower than a year ago. Just 21,086 mortgages were approved last month, down from 54,564 in August 2007.
• The international prime residential property market is weakening, says Knight Frank. Prices of prime Central London properties have grown by an average of just 1.8% in the past 12 months, down from over 30% the previous year.
• The CML has announced it will not be making any predictions on future house prices in the near future. The CML has in the past been one of the more optimistic forecasters – their latest prediction in May said prices would be 7% lower in the fourth quarter than last year. But with prices already down over 10% (according to Halifax and Nationwide), the CML is to cease predictions. “While we accept that our forecasts currently understate the likely magnitude of the house-price correction in the UK this year, we believe it is futile to update them in current market conditions,” a spokesman told the FT.