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April 4, 2012

Why in the world is there a property boom in Cuba?


There are some things we just take for granted. Like the ability to buy and sell a car or a home.

BY MICHAEL YARDNEY

Sure we sometimes complain that properties are expensive, but we just expect to be able to buy or sell something we own.

However, it’s not that way everywhere in the world.

When Fidel Castro took power in Cuba in 1959, he placed a ban on property sales, which has been in effect until late last year, when the purchasing and selling of private property was legalised by President Raul Castro in a bid to keep the struggling Communist state afloat.

Not surprisingly, the newfound freedom to buy property has created a property boom in Cuba according to a report in the Daily Mail. http://www.dailymail.co.uk/news/article-2122601/Cuban-property-market-booms-house-buying-allowed-time-1959-Revolution.html

Only citizens and permanent residents are allowed to buy properties in the Communist country but many Cuban exiles in America are entering the property markets through friends and family on the island  -  bumping up property prices.

Why the ban on property sales?

In an effort to fight absentee ownership by wealthy landlords, Fidel enacted a reform that gave title to whoever lived in a home. This meant most who left the island forfeited their properties to the state.

Cubans have long bemoaned the ban on property sales, which took effect in stages over the first years after Fidel Castro took power in 1959.

What this meant was that before this new reform, Cubans were mainly stuck in the homes they were born in, only moving through house swaps and marriages.

Since no property market was allowed, the rules meant that for decades Cubans could only exchange property through complicated barter arrangements, or through black market deals.

Some Cubans entered into sham marriages to make deed transfers easier. Others made deals to move into homes to ‘care’ for an elderly person living there, only to inherit the property when that person died.

Many more were forced to live in overcrowded apartments with several generations crammed into a few rooms.

The new property market will alter everyday life for Cubans, with many being able to choose where to live for the first time.

But the government has insisted no individuals will be able to accumulate great wealth through the new legislation, as sales will be subject to taxes.

It’s much the same with cars

The ability to buy and sell property came shortly after the legalisation of the purchase and sale of cars.

But the new rules have so many restrictions that it’s still hard for ordinary Cubans to buy new cars.

And you can go into business

Raul Castro took over from his infamous brother Fidel in 2008 and has said repeatedly that “the system” isn’t working in the Communist country where the government employs more than 80 per cent of the workers in the island’s economy.

So he has now allowed citizens to go into business for themselves in a number of approved jobs – everything from party clowns to accountants – and has pledged to streamline the state-dominated economy by removing 500,000 government workers.

Yes our government could do a better job, some properties in Australia are expensive and unfortunately the value of my home has fallen a little over the last year. But overall the wealth of our nation is increasing, our standard of living is improving and we’re living longer.

Yes, we live in the “lucky country”.

Michael Yardney is the director of Metropole Property Investment Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Investment Update blog


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