Monday, September 22, 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
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.

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.”

Source: TimesOnline.Co.Uk

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