The Cuban government has approved a law allowing individuals to buy and sell homes for the first time in 50 years, in the latest instalment of President Raul Castro’s reforms of the island’s Soviet-style economy.

Published yesterday in the Official Gazette, the law applies to Cuban citizens and permanent residents and allows sales, donations and exchanges between private parties.

The reform goes into effect on November 10 with the goal of “contributing to the solution of the housing problem” and “guaranteeing the effective exercise of the rights of owners”, the law said.

The measure is part of a series of economic reforms aimed at reviving the economy of the communist-ruled island and easing a severe housing shortage.

Mr Castro has begun the process of reorganising a system in which 85 per cent of the country’s five million workers are employed by the state.

The expansion of the private sector was the main plank in reform plans endorsed at the Sixth Congress of the Communist Party, in an effort to restructure a Soviet-style economic model and revive a stagnant economy while stopping short of creating a market-led system.

Nearly 80 per cent of Cubans own their residences but until now the only transactions available were under a complex system of informal exchanges. At the same time, the country is believed to have a deficit of around a million homes, with the situation made worse by a shortage of building materials and hurricane damage in recent years.