Buying property in Cuba

From The Sunday Times
September 21, 2008
Buying property in Cuba
Surely you'd be mad to invest in a Communist state? It might raise a few
eyebrows, but the opportunities are out there
Havana
Peter Conradi and Anna Mikhailova

With its crumbling colonial architecture, little changed since the days
of Ernest Hemingway, and streets full of battered 1950s Buicks and
Chev-rolets, Cuba has long been caught in a time warp. Yet there is
change in the air: now that Fidel Castro, at the ripe old age of 82, has
finally gone into retirement, the Communist regime is loosening its
grip, while there has been speculation that November's elections in the
USA could lead to a softening of Washington's 46-year-old embargo.

Yet would you really want to invest your hard-earned money in a home in
one of the few countries left on earth that - in theory, at least –
still espouses Marxism-Leninism? Andrew Macdonald, an entrepreneur who
has worked on a variety of projects in Cuba and across Latin America for
more than a dozen years, is hoping the answer will be yes.

The island's 11m people are still counting the cost of this year's
hurricane season, which has already been more than devastating than
most, but Macdonald insists the long-term prospects are good. "It's the
Caribbean plus much, much more – like romance," he enthuses over mojitos
in the London branch of his chain of El Floridita bars, which take their
name from one of Hemingway's favourite watering holes in Havana. "It's
cultural, it's glamorous, it's exotic – Cuba has influenced the whole of
South America, and reinfluenced Spain itself."

Keen to take its £1 billion a year tourism industry upmarket and away
from the all-inclusive tours with which it has hitherto been associated,
the Cuban government this year announced plans to build nine
golf-centred complexes on the island – which is almost the size of
England – and, inspired by the success of such resort developments
elsewhere in the world, decided to add residential property to the mix.
Background

The Carbonera resort, which Macdonald's company is developing, will be
the first of the nine. And, in a move that may leave Castro's more
ideologically rigorous compadres choking on their Cohiba cigars, the
properties will be situated in that most yanqui of institutions, a
"country club" – and a six-star one to boot, with a marina close at hand.

The development will be about an hour's drive east of Havana, near
Vara-dero, the beach resort at the centre of Cuba's drive into package
tourism. It will be on a considerable scale, with 165 villas, ranging in
size from 360 to 500 square metres, and 650 one, two- and three-bedroom
flats. Work is due to start next May. With prices expected to be set at
about £1,000 a square metre when the project goes on sale in November,
through Savills, an entry-level one-bedroom flat should cost about
£70,000 – considerably cheaper than elsewhere in the Caribbean.

As well as Britons and other Europeans, the project is aimed at
Canadians, who do not face restrictions on visiting the country and have
become a mainstay of its tourist industry. It may appeal to Americans,
too – especially those of Cuban origin – even if the boycott prevents
those who live in the United States from buying in their own name.

That the authorities are allowing foreigners to buy at all is a sign of
how far Cuba has come since the collapse, 17 years ago, of the Soviet
Union, which deprived Castro not only of ideological inspiration, but of
his country's main source of financial support. One of his first acts
after seizing power in 1959 was to expropriate private property –
putting his regime on a collision course with Washington, which has
maintained a hard line against Havana ever since.

Macdonald insists property rights are safe these days, although, for the
time being at least, the properties will besold on 75-year leases rather
than freehold. This could change in the next few months – Macdonald says
discussions are being held with authorities about "the most appropriate
mechanism".

Still, the time when British or other overseas buyers can pick up a flat
or house outside designated areas such as Carbonera remains a long way
off. Although the constitution now allows private property ownership,
and the majority of Cubans own their own homes, they are not allowed to
buy or sell them to each other, let alone to a foreigner. Instead, they
can merely "swap" them – though money inevitably changes hands with such
deals, albeit unofficially.

Cuba a step too far? Then what about Nicaragua? For much of the 1980s,
this Central American nation was embroiled in civil war as the left-wing
Sandi-nista government fought off the US-funded Contra rebels, before
being voted out in 1990. Two decades on, the Sandinistas' charismatic
leader, Daniel Ortega, is president again, but he is a changed man – and
keen to welcome foreign capital.

Evidence of the changed climate can be found in the number of large
developments planned in Nicaragua. One such project, the Seaside Mariana
Spa and Golf Resort, within an hour's drive of the capital, Managua, is
a 923-acre site that will have 900 freehold plots, condos and villas
around an 18-hole golf course. The properties are already on sale, with
prices starting at £113,000 for a one-bed flat, rising to £391,000 for a
three-bed villa. It is due to be completed in 2010.

"Nicaragua is the next big thing in Central America, if not the world,"
says Kevin Fleming, chairman of Grupo Mariana. "It's the safest country
in the region, judging by violent crime rates, and it has a favourable
climate for investing." Property rights are secure, taxes are low and
foreigners can obtain mortgages, he adds.

Vince Tallent, 42, chief financial officer for Mach, a mobile-phone
company, has spent £310,000 on a penthouse flat and two plots of land at
Seaside Mariana. Tallent, who lives in Surrey with his wife and three
children, plans to spend family holidays in his property and let it out
for the rest of the year.

"I'd been to Nicaragua before and I loved it," he says. "It's beautiful
and very new – there are lots of things happening. I like investing in
Central America because where there's more risk, there's a higher
return. Nicaragua is a lot more stable than before and is getting ready
for more investment – they are about to build a new airport."

Other countries in Central America, such as Costa Rica and Panama, long
popular with American retirees, are increasingly being marketed to
Britons. So, too, is the Caribbean island of Margarita – although those
marketing it often downplay the fact that it is part of Venezuela, whose
volatile president, Hugo Chavez, is a cheerleader for antiAmericanism in
the area.

If you're after sun and sea, though, is it worth looking at Latin
America at all when you could buy in one of the more established
Caribbean destinations, or in Thailand, or perhaps Dubai?

John Howell, senior partner in the International Law Partnership and a
veteran of the foreign property scene, expects the housing markets of
Nicaragua and other countries in the region to benefit from a "creeping
American-isation", boosted by the desire of that country's baby-boomer
generation to find somewhere warm – and cheap – in which to retire.

Cuba, however, remains a special case, Howell believes – especially
because there is no guarantee that the country will experience the
gentle transition from communism to capitalism enjoyed by the Soviet
Union's erstwhile eastern Europe satellites. "It's a fabulous place, and
will come right in the end, but it's cheaper than the rest of the
Caribbean for obvious reasons," he says. "If I had a pot of fun money I
could afford to lose, I would buy there, but it's not the place to
invest your life savings." +

Savills ; 020 7016 3740

http://property.timesonline.co.uk/tol/life_and_style/property/overseas/article4786300.ece