Developers offer a number of schemes to support demand and increase discounts. Owners of secondary housing are also ready to reduce prices
In January 2024, the capital’s Rosreestr department registered 7.85 thousand mortgage loan agreements, the drop by August — the last month before the start of the cycle of raising the Central Bank’s key rate — turned out to be almost twofold.
We talked with experts about how developers react to the fallen demand and what special offers they are preparing for potential buyers.
Mortgages are losing demand
Even taking into account the seasonal factor, market participants interviewed by the editorial board of RBC-Real Estate say, a serious decline in mortgage demand is obvious. This applies to both the secondary market and new buildings — although preferential state programs remain in the primary market, changes in them have cooled the interest of buyers in the metropolitan region.
And this is understandable: the cost of servicing a mortgage loan in Moscow has increased significantly over the year, emphasizes Ruslan Syrtsov, Managing Director of Metrium. Consider an apartment worth 12 million rubles. We will take 18% as the market rate at the moment, and 11% for February 2023. The initial payment has increased from 20% to 30%. The term of the loan is 30 years. The type of monthly payments is annuity payments,” the expert explains. — If in February last year the monthly payment on such terms would have amounted to about 91.4 thousand rubles, then in February 2024 it was already 126.6 thousand rubles per month.”
The changed conditions of the state programs also affected the interest of potential borrowers. It’s not just about reducing the limit on the state program for new buildings, which actually made it uninteresting to metropolitan borrowers — there are practically no apartments suitable for the limit of preferential mortgages in the old borders of the capital, mostly such offers are in New Moscow.
“Within the framework of preferential products, due to the fact that many banks switched to mandatory subsidizing rates, developers had to raise prices in order to enter preferential programs. On average, the increase was at the level of 10-15%,” explains Alexey Novikov, Director of the Est—a-Tet Mortgage Lending department. According to the Central Bank, mortgage demand in the whole country decreased by about a quarter year-on-year, and loans under preferential programs in February were half the average monthly figure for the second half of 2023.
According to Ruslan Syrtsov, the decrease in mortgage availability was the reason, among other things, for the transition of about 20% of demand from the housing purchase market to the rental market. If earlier, with low mortgage interest rates, rental prices were almost comparable to the monthly mortgage payment, then after the increase in mortgage rates, the rental option for some market participants became more attractive for solving the housing issue,” says Artur Akhmetov, head of the Mortgage and Insurance department at Avito.
Photo: Shutterstock
Installments instead of mortgages
The decline in demand for more expensive housing loans in the capital’s new construction market is accompanied by an increase in the popularity of installments. According to market participants, such programs are now offered for more than 40% of the capital’s supply. In transactions with new buildings, the share of installments, depending on the company, varies from 10% to 30%.
“Against the background of restrictions on state programs, additional commissions that lead to an increase in the cost of lots, and a decrease in sales rates, installments are becoming a good alternative to mortgages,” says Yulia Ibragimova, director of the mortgage center of Miel Group. — The share of installment offers has increased over the past month. We analyzed the data of one of the largest developers and can note that since December, in a number of its Moscow residential complexes, the share of lots offered in installments has increased by a third at once — from about 70% to 100%.”
Incom-Real Estate notes that there were 60% more installment transactions in the company’s practice in February 2024 than in February 2023.
Naila Abaidulina, head of the Urban Real Estate Department at Point Estate, notes that installments have always been common in the high-budget segment, but now their parameters have changed. “Now all developers of the premium segment provide installments until the end of construction, often this is a free option, unlike how it was before: installments were either small, paid, or absent altogether,” the expert explains.
Tranche mortgage
Alexey Novikov notes that one of the main tools with which new buildings are currently being implemented is an installment mortgage, which is also called a tranche: the loan is divided into parts both in amount and in terms, this allows you to split the monthly payment. “Tranche mortgages in Sberbank are one of the main products in addition to subsidies,” Novikov says.
“The tranche payment program has returned, when it is enough to make 15% of the initial payment, then 10% monthly, and the remainder can be paid after the house is put into operation or switch to a mortgage,” notes Valery Kochetkov, director of the New Buildings department at Inkom—Real Estate. The expert notes that the latter option is in demand among buyers who expect to wait out the period of high market rates in this way.
Letter of credit mortgage
Ruslan Syrtsov mentions a letter of credit mortgage as an increasingly popular sales tool for new buildings. This sales scheme involves changes in the equity participation agreement: part of the shareholder’s funds, as with the standard DDA, is placed on an escrow account, and part on a letter of credit, which allows the developer to use this money without waiting for the house to be delivered. To make the product attractive to borrowers, they are offered a mortgage discount at the expense of additional profitability for the developer. The Central Bank has recently become interested in this method of sales — the regulator indicates that the use of a letter of credit creates risks for the borrower: in the event of bankruptcy of the developer, part of the funds may disappear, since the account, unlike escrow, is not insured.
According to Alexey Novikov, in various variants, letters of credit for the sale of DDA on average in the market can now be involved in 20-25% of transactions.
Photo: Shutterstock
Trade-in, rent on account of purchase, discounts
“The decline of mortgages is being replaced by other sales tools,” says Valery Kochetkov. – For example, they remembered trade—in again – even the purchase of an old apartment with the possibility of living before receiving the keys to a new one is practiced.” There are also rental offers on the market for the purchase of new buildings — for example, the developer GK FGC offers such a payment option in one of its apartment complexes.
Meter by meter: how real estate trade-in is developing
“Along with tranche and letter of credit mortgages, as well as various types of installments, developers offer trade-in to attract customers, including with accommodation,” says Ruslan Syrtsov, Managing director of Metrium.
In the secondary market, the exchange of one apartment for another in conditions of prohibitive mortgage rates is also gaining popularity. “Those who are not ready to give up the purchase are considering alternative deals, that is, in fact, the exchange of apartments with or without additional payment with other owners. And despite the fact that alternatives are often confusing, and the search for participants takes a long time, the demand for them is quite high: about 60% of transactions with ready—made real estate in our company take place in this format,” says Tatyana Podkidysheva.
The expert adds that this format of transactions is only able to partially compensate for the drop in demand. “According to our company, about 15% of the owners who planned to sell real estate, refocused on renting out the object in order to receive at least some income during a lull in the market, and after the normalization of the situation, they have already sold,” says Tatyana Podkidysheva. Also, according to her, the share of sellers ready to bargain has increased in the secondary market. “Those owners who want to sell as soon as possible, reduce the price and offer large discounts, because they are afraid to sell the apartment even cheaper in the future,” she explains.
Developers also give discounts to maintain demand, the managing partner notes bnMAP.pro , the founder of the company “Best-New Building” Irina Dobrokhotova. “Many developers are returning to subsidized programs, and are also working to increase discounts,” she says.
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