The editorial board of RBC-Real Estate has collected the most striking statements of officials about the state program of preferential mortgages, which have been announced over the past six months
On July 1, the preferential mortgage for new buildings at 8%, launched in the pandemic year 2020, ends. Over the four years of its operation, the program has received various ratings: from rave reviews to critical ones. During this time, a certain confrontation between the financial and building blocks has developed. If the Bank of Russia spoke more often about the need to complete the program, the Ministry of Construction advocated its extension.
Building block: “We have passed the pandemic, we are passing it with our heads held high”
Deputy Prime Minister Marat Khusnullin, who oversees the Construction Complex in the Russian government, advocated the extension of preferential mortgages and generally positively assessed its impact on the housing construction market.
“There is a lot of talk about mortgages in general, probably among all specialists in this field. But I will say about the citizens — is it good or bad that 4.4 million citizens improved their living conditions last year? More than half of them are due to mortgages. That is, people have the prospect of a stable loan payment at a rate of 6% on a family mortgage or at 8% on a preferential mortgage. People have made the decision to get married, have an additional child, and change their living conditions. What kind of money should I count it with?” — Marat Khusnullin said in an interview with TASS, noting that the state guarantees people that the rate will be subsidized for the entire term of the loan, despite the high costs.
In his opinion, mortgages must be maintained for a long-term period, since every time due to changes in the program, there are spikes in demand. “We don’t need these jerks, we need the mortgage portfolio to grow steadily by 5-7% per year on mortgages. To do this, there must be stable rules of the game. And starting from July 1, we should have new mortgage rules. I really hope that we will make measures to support family mortgages long—term,” he explained.
The Ministry of Construction also talked about the need to maintain preferential programs, including mortgages for new buildings.
“Of course, we would very much like all preferential programs to be extended <...>. I think that a verified solution will appear after July 1, 2024,” said Irek Fayzullin, Minister of Construction and Housing and Communal Services, at the end of last year. At a speech in the State Duma in May, the minister already clarified that mortgage programs in Russia will be adjusted taking into account accessibility, the balance of supply and demand in the real estate market. “It is important to maintain high rates of commissioning, to form the necessary proposals in the housing market. To adjust the mortgage taking into account accessibility, as well as the balance of supply and demand,” he explained.
Deputy Minister of Construction Nikita Stasishin, in turn, said that the program had helped the industry to survive more than one crisis situation.
“A lot of people say that the preferential mortgage was a mistake. In my opinion, this is not the case. Thanks to her, we have passed the pandemic, we are passing it with our heads held high. Today we have achieved a balance of supply and demand in the primary market,” Nikita Stasishin said, speaking at SPIEF 2024. “Some also say that developers have earned too much. But they have invested a significant part of these funds in technology, in new projects, and in infrastructure. I would like to note that banks earned no less then,” the deputy minister added. In his opinion, after the end of the program there will be a decrease in demand, but it will not be fatal to bring down the pace of construction gained over four years.
Financial block: the benefit was eaten up by rising prices
The Bank of Russia opposed the extension of a preferential mortgage for almost the entire duration of its validity. The regulator’s point of view is that mass preferential mortgages should be applied for a short period of time as an anti-crisis measure, and the support of the mortgage market itself should be targeted. The widespread use of the preferential program leads to imbalances and overheating in the market, according to the Central Bank. Among them are accelerated price growth for new buildings, an increase in the price gap between secondary and primary housing, as well as a decrease in housing affordability.
“The situation in the mortgage market should lead to an improvement in housing affordability, not a price bubble. The benefits of low rates should not be eaten up by rising prices, as they are. <...> We see that in four years of massive preferential mortgages, average apartment prices have doubled in the primary market, and salaries and incomes have increased by about one and a half times. That is, the growth in housing prices is outstripping incomes,” said Elvira Nabiullina, Chairman of the Bank of Russia.
The head of the Central Bank has repeatedly stressed in her speeches that the regulator stands for targeting preferential mortgage programs. “As for preferential mortgages, our position is that one broad non-targeted program should expire in the summer and not be renewed. We have always supported targeted programs, including family mortgages,” Elvira Nabiullina explained.
According to her, the main goal is to make market mortgages more affordable, for this the share of preferential mortgages should be significantly lower. “Because all other borrowers pay a higher rate for those who have the opportunity to get a mortgage at preferential rates,” Elvira Nabiullina noted.
The Ministry of Finance also advocated targeting preferential programs, tightening the terms of the program (it occurred in December 2023) and reducing the share of preferential mortgages in the total volume. By the end of 2023, the volume of mortgage loans in the primary market due to all preferential programs reached about 90%.
“Our task as a regulator is to reduce this figure to 20-25%, specific targets and specific parameters will still be discussed with interested market participants. But it is important for us to ensure the support of citizens, not developers and banks,” said Finance Minister Anton Siluanov.
The State Duma: an erroneous program
The deputies of the State Duma criticized the preferential mortgage, explaining that the broad preferential program led to a decrease in housing affordability. According to Anatoly Aksakov, head of the State Duma Committee on the financial market, the state mortgage support program for new buildings turned out to be erroneous, as it led to a significant increase in the cost of housing.
“I think this is (a preferential mortgage on new buildings. — Ed.) an erroneous program that stimulated a significant increase in the growth of housing costs. As a result, the gap between the cost of apartments on the primary market and on the secondary market was almost 50%. Since this program concerned new housing, the price was inflated and people paid more than they benefited from the preferential loan rate. That is, people actually lost in finance,” Anatoly Aksakov said in an interview with TASS. In his opinion, with the end of the program, housing will become more affordable and will be sold “at reasonable prices, and not at inflated, inflated prices.”
Aksakov’s colleague, Chairman of the State Duma Committee on Construction and Housing and Communal Services Sergey Pakhomov, spoke about the decrease in housing affordability against the background of a massive preferential program. According to him, the preferential mortgage led to an increase in prices and worked more for the investor than for the ordinary buyer.
“Let’s be honest, mortgages have not made housing affordable recently, even at a zero rate,” Sergei Pakhomov said.
According to him, conditions for preferential mortgage programs for the next five years will be formed in the near future, and they themselves will become targeted. “But in general, this door called “preferential mortgage” is being closed. What will happen next? Well, it’s obvious, there will be a decline in demand for six months or a year. Big or not, I’m not ready to talk about it, a question for forecasters, but there will be a recession,” the deputy noted.
Accessibility “at the absolute bottom”
The head of Sberbank, German Gref, stated that preferential mortgages for new buildings in Russia do not need to be canceled, but it needs to be changed.
“Since the beginning of last year, I have been advocating for the state program to be reduced. It should not be abolished, it should be reduced,” he said.
Recently, Mikhail Matovnikov, director of the Sberbank Financial Analytics Center, said that mass preferential mortgages for new buildings should be preserved in case of crises, “so that developers would understand that if it goes down again and the key is 150%, then this state support will remain with us.” At the same time, the rate should be higher — 12%. At the same time, the chief analyst of Sberbank noted that preferential mortgages led to a drop in housing affordability in Russia, and its main recipients were secured borrowers (their share increased from 58.9% to 85.4% during the duration of the program).
According to Matovnikov, the number of square meters that a recipient of a median salary can purchase in Russia using a mortgage has decreased by 6 square meters in the primary market since 2020, and by 9 square meters in the secondary market, amounting to 25.8 square meters. These are the minimum figures for the last ten years.
“In terms of what we are currently building, we are at an absolute bottom. It has never been so bad in terms of what a normal person can afford to buy, taking into account the mortgage and all subsidies,” Mikhail Matovnikov said.
VTB has also recently advocated targeting preferential programs.
“The coverage of support for preferential mortgages will be reduced, it will become more targeted. But the Arctic mortgage is correctly aimed at solving specific tasks. Not only social, but also economic. We hope that mortgage programs of this kind will continue. Moscow can do without a preferential mortgage, the Arctic regions need it,” said Andrey Kostin, head of VTB.
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