Swap shop

Swap shop
Where a beach-front house can be (almost) yours for a snip
Cuba's housing market
Feb 3rd 2011 | HAVANA

CUBA'S government likes to crow that over 85% of Cubans own their homes.
The claim is technically correct. However, there is a catch: holding
title to a property does not give you the right to sell it. The only
legal way to move in Cuba is by swapping residences—a slow, bureaucratic
and often corrupt process known as the permuta ("exchange"), which
requires finding two roughly similar properties and getting state
approval. To avoid this hassle, some Cubans prefer to marry the owner of
a property, transfer the deed, and divorce.

Because there is no incentive to build new homes, Cuba suffers from a
dire housing shortage. Many buildings have been repeatedly subdivided.
In some families three generations share one bedroom.

After replacing his brother as president in 2008, Raúl Castro has
legalised and taxed bits of Cuba's informal economy, like pirated DVDs
and used furniture. Now he has turned to housing. In 2010 the government
relaxed rules on forming building companies and buying building
materials. It is preparing to let foreigners buy property in tourist
zones. And in April the Communist Party Congress is expected to allow
Cubans to "buy, sell, or swap" their homes.

The effect of these measures may be limited. Most permutas already
involve money under the table—ranging from a few thousand dollars to
$40,000 for a smart three-bedroom flat. The market will be heavily
regulated: officials say they will ban the (as yet undefined)
"accumulation" of property. And buyers may be discouraged if they have
to prove that their money did not come from the vast black market.

Even so, allowing selling is risky. It will raise tax revenues, but
could belie Cuba's myth of material equality. If too many luxury homes
pop up, the poor may further doubt that America's trade embargo is the
cause of their misery. Already a cluster of sea-front houses west of
Havana, acquired via permuta by pop stars and foreigners, is getting its
first lick of paint in decades.

The market will probably benefit from Barack Obama's loosening of the
embargo. He has relaxed most limits on visits and remittances, which
should increase demand for Cuban homes and the amount buyers can pay.
Some Cuban-Americans are even considering returning for retirement. "Now
is the time to move", says Ada Fuentes, who recently came back to Havana
after 49 years in New Jersey. "If you have money, life's good here".

http://www.economist.com/node/18063684?story_id=18063684&fsrc=rss