An ordinary “odnushka” for a million dollars: He could live near the walls of the Kremlin, but there is a mortgage crisis

An ordinary “odnushka” for a million dollars: He could live near the walls of the Kremlin, but there is a mortgage crisis

Рядовая «однушка» за миллион долларов: Мог бы жить у стен Кремля, но — ипотечный кризис

The government’s economic unit is closely monitoring, among other things, the increase in loan rates, said Dmitry Peskov, the press secretary of the President of Russia, when asked about Sberbank’s increase in mortgage rates by another 3.5 points for basic programs.

Since November 15, Sber has increased rates for ready-made housing from 24.6% to 28.1%, and for housing under construction from 24.9% to 28.4%. Without discounts, these values reach 30.7% and 31%, respectively.

According to calculations by RBC-Real Estate, in October, to service a mortgage for a one-room apartment in Moscow with an average cost of 14 million rubles, it was necessary to earn about 346.4 thousand rubles to pay 207.8 thousand rubles.

After the increase in the Savings rate, according to DomClick, 395.4 thousand rubles of income for a monthly payment of 309.9 thousand rubles will be required to buy such housing in the capital.

This means that with a 30-year mortgage, the overpayment for an apartment in a new building will amount to 97.6 million rubles, and not 60.8 million rubles, as it was back in October. That is, the final cost of an ordinary “one-bedroom apartment” in a residential area will be equal to…

Well, for example, luxury apartments of 150 square meters on Tverskaya in the Mayakovskaya metro area. Those who wish can take a virtual million dollars themselves and get a price for Moscow real estate. I assure you — you will enjoy the offers!

— It is impossible to call the situation normal. It turns out that the mortgage rate becomes actually prohibitive. This means stopping construction and reducing demand. At best, stagnation in the construction sector may occur with this option. I should have seen this coming. We are already talking about the result. The conditions for this have been created for several years,” economist Andrei Bunich assesses the situation.

— Until recently, the key rate was low. It grew only for a short time at the beginning of its period (the figure was 20% from February 28 to April 10, 2022), and then began to fall. Until August 2023, the rate was absolutely normal (at that time, the regulator raised it by 3.5 percentage points to 12%).

It turns out that in about a year we have skipped a lot of intermediate indicators from 7-8% to 21% of the key rate and an exorbitant mortgage rate of more than 28%. A smooth increase would not cause such excesses. Now it is unclear how to act in such conditions. It’s impossible for the real estate market to digest this.

“SP”: How will this crisis develop?

— In my opinion, there will be a cooling of the real estate market. This is not a disaster in itself, as the real estate and construction market is cyclical. There are always ups and downs, as there is no constant growth in construction. For example, some players have built houses in the wrong segment or area, while others have misguided demand and invested in projects that cannot be implemented.

During a typical market downturn, those who made ineffective decisions will sell assets and may go bankrupt, but nevertheless it is a healthy process. Prices are falling, people are overbooking, and then new projects are coming.

A high rate contributes to this process. Of course, developers can’t build at this rate, and it’s hard for people to pay their mortgages. In theory, there should be a drop in demand and prices. On the other hand, the government cannot allow a sharp drop in real estate prices, because banks use real estate as collateral. That is, in this case, there is a risk of collapsing your own banking sector.

“SP”: Can metallurgical enterprises and cement plants face difficulties due to problems in the construction industry?

— Of course. Everything related to construction may be affected. Our building materials sector is good, we fully provide ourselves with building materials, which is rarely seen in other countries. Of course, difficulties in real estate can lead to problems and layoffs in the building materials service sector and the related metallurgy sector, and an investment pause will begin. Who will build further in such conditions?

If there is a short-term correction, then you can still get out of this situation. But if this turns into a serious problem, it will spread to the banking sector itself. It is in the interests of the banking system to prevent such processes. In the next iteration, the crisis may affect the financial sector, then it will be a real disaster.

“SP”: In early November, “Kommersant” with reference to “Dom.RF” reported that in October, more mortgage loans were issued under the state program “Family Mortgage” than in September (184.2 against 180.7 billion rubles). Why did this happen, because the Central Bank raised the rate by 2 percentage points just last month?

This is the inertia of the market. There is also a factor when people buy mortgages from us, disguising some other transactions under this. This is legal, market participants use mortgages as an additional means of purchase and sale.

These operations may continue for some time. Sometimes it’s more profitable than paying the entire price at once. But still, even such operations become unprofitable over time, given the market situation.

SP: Sberbank has resumed transactions under the Family Mortgage program since November 15, what will happen to it?

— The rate for everyone cannot rise to values above 28%, but the family rate will remain at the same level, it will still go up. The budget will not cover the difference between the market value and such a preferential mortgage. In this case, the entire mortgage will have to be transferred to the budget, but this is not possible.

The limits (the maximum amount of funds that banks can issue as a preferential mortgage and count on compensation from the state for lost expenses — “JV”) for 2025 are already at the limit. At this rate, you need almost 1 trillion rubles. to compensate for the family mortgage. 637 billion rubles are provided for next year, but it is not known whether this amount will be enough.

Now banks partially issue preferential mortgages at the market rate, as they have run out of limits. Formally, the preferential mortgage remains, but banks may not issue it or offer it under a different scheme, where half will have to be paid at the market rate, more than 28%. Therefore, either the budget burden will increase, which is unlikely, or the interest rate on the family mortgage will increase next year, or the number of borrowers will be limited in various ways, which is already happening.

A positive scenario can be realized if the difficult situation in housing construction does not last long, and the Central Bank suddenly begins to sharply reduce the rate — for example, as early as 2025, but it is too early to talk about it. Perhaps the potential for a rate increase has not been fully exhausted. If not in December, then an increase may occur at the next meeting of the regulator. Therefore, it is necessary to proceed from the scenario that the limits for preferential mortgages in the budget are limited.

It might even be better to go for a sharp decline in prices in the sector, which is beneficial to those people who were waiting for the cost of mortgages and housing to fall. If the price reduction does not last long, then the market returns to normal. On the other hand, it is not clear how it is possible to cool only the real estate market without affecting other sectors of the economy.

“SP”: Can the mortgage problem lead to a slowdown in GDP growth?

— One decrease in construction is already contributing to the slowdown in economic growth. It is clear that related industries will also be affected. The main industries that have generated growth rates in recent years are the defense industry and construction. By the end of 2024, Russia’s GDP growth will be almost 4% growth in 2024, this is a good indicator, of course, it would be worthwhile to support this trend. In the case of a negative scenario with a high key rate, a mortgage crisis and a potential collateral crisis, GDP growth may slow down by 2%.

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