With Sellers but No Buyers, Prices Plummet in Cuba’s Housing Market

In the current real estate climate, prices are falling and homes remain on the market longer. (14ymedio)

14ymedio bigger14ymedio, Natalia Lopez Moya, Havana, 11 January 2023 — “Business has dried up,” 52-year old Victor Manuel Soto says categorically. Soto closed his real estate office in Cuba, packed his bags, left for Nicaragua and then headed to the southern U.S. border, which he recently crossed. “Almost no one is buying houses. Out of every ten properties I sold, nine belonged to owners desperate to sell.”

After prohibiting individuals from buying or selling their homes for decades, the government finally legalized such sales in late 2011. In a country where 85% of homes are privately owned, Soto and his wife suddenly saw that managing real estate transactions could be a gold mine. “My wife left her job as an accountant at a state-owned company, I left my position at the Ministry of Tourism and we began setting up our own business.”

At first they only posted houses for sale on classified ad sites dedicated to buyers’ specific interests,  assuring sellers they would post their listings only on the most important digital platforms. “Later we put together a web of contacts and were able to offer a more comprehensive service, such as taking care of the required paperwork, following all the legal procedures but doing it much more quickly.

But four years ago Soto noticed that his income had started to decline dramatically. “We had fewer and fewer people who wanted to buy. Most of our clients were coming to us because they wanted to sell and wanted to do it quickly,” he says. “Currently, supply exceeds demand. Or to put it more simply, there are many houses for sale but few interested buyers.”

In the current real estate climate, prices are falling and homes remain on the market longer, with successive price reductions and sellers offering to include appliances and furniture at no extra cost. “Most of the people I knew who were in the real estate business have closed up shop and have gone into other lines of work.”

Falling prices have forced many real estate agents to quit. “A few years ago the average price per room in Havana was between 10,000 and 12,000 dollars. A three-bedroom apartment, for example, could go for $30,000 to $36,000 depending on location and  building condition,” says Nicia, a self-employed real estate agent who is still active in the business.

In 2013, two years after home sales were legalized, the emerging real estate market saw 80,000 transactions according to data from the Mercantile Property and Heritage Registry, an agency of the Ministry of Justice. All indications were that the number of sales would continue to grow, or would at least remain stable.

“Now we’re seeing three and four-bedroom homes going for less than $25,000 because the owners are eager to sell to get the money they need to emigrate. And for agents or brokers, when prices get this low, we lose the ability to make money ,” she laments.

“At the peak, around 2015 or 2016, when prices were high because it had become legal to buy and sell homes in Cuba, real estate agents were making good money. But that bubble burst. Now you have to work ten times as hard to earn a buck and even then it’s not easy,” she says. “A few years ago we had a lot of foreign clients buying homes through friends or loved ones in Cuba. Now that’s happening less and less.

Nicia recalls that in March 2016, when Barack Obama visited the island, she managed to close six sales in just one month, two of them involving Cuban-American or European buyers. “There was this idea that the country would be opening up and that it was time to buy property here. But that enthusiasm has been waning. Right now, I have two houses for sale: a pair of houses that I sold just last year.”

“To sell a home, you have to find ways to entice buyers. A low price is one way but so is a house in move-in condition, or one that’s already furnished,” she points out. “The few clients I have now are looking to buy because they managed to downsize and want a place that doesn’t need any work.”

Nicia herself believes her days as a real estate agent are numbered. “I’m trying to get together the money I need to move to Spain with my two children. All three of us have Spanish citizenship but we still need a bit of money so we can start a new life there.” She is turning her business over to a cousin but, as she says, “it’s not worth very much now because the market has tanked.”

’It’s also a headache because it’s a complicated business. Many of the first licensed real estate agents were forced to shut down. I have colleagues who ended up in court for charging the client a commission.” Though the practice is illegal, buyers typically pay realtors between 10% and 25% of the total sale price.

“The tax increase on home sales was also a big blow to us,” Nicia acknowledges.” Initially, the tax rate was set at 4% for buyers’ asset or inheritance transfers and the same for sellers’ personal income. But in 2017 it went up. Now it’s determined by the house’s characteristics, such as its location and size.”

“With higher taxes, the collapse of the market itself, too few buyers and sellers who want to be paid in dollars, which they then send overseas, we’re earning less and less. Though they won’t admit it publicly, the only realtors who are surviving are those with connections to people in government or to foreigners who can afford to wait for the market to improve.

Some of these real estate startups have come up with strategies to attract buyers such as an “auction” in which the house is listed at price that can change in an online bid. Among them is Lucas Inmobiliarias, which has a large portfolio of single-family homes, mansions and farms with prices that, in most cases, exceed $100,000. So far, however, no buyer has submitted a bid on any of the four properties currently being auctioned on the company’s website.

There is no shortage of listings on the company’s website. Page after page contains photos of spacious buildings, gardens with leafy trees and even swimming pools inviting viewers to take a dip. But every month the listings reappear, accompanied each time with a price reduction. A house in upscale Miramar, which won an architectural design prize in the 1950s, was posted on the site two years ago and is still for sale.


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