Rest in peace, “preferential” mortgage

Покойся с миром, «льготная» ипотека

Photo: Eric Romanenko/TASS, archive

The increase in the refinancing rate to 16% coincided very synchronously with another event in the field of lending — the conditions for government-subsidized (“preferential”) mortgages were greatly tightened. In fact, there are completely prohibitive parameters that create an almost insurmountable barrier to obtaining this type of loan. Realtors are already in a panic — even in the two New Year’s Eve weeks, real estate prices can drop significantly.

“The government has decided to adjust a number of parameters of preferential mortgage programs. The new resolution increased the premium on a preferential mortgage to 30%, which is issued at a rate of 8% per annum for the purchase of housing in new buildings, the construction of a private house or the purchase of land for its construction. This measure is aimed at improving the quality of loans. The maximum amount of a preferential mortgage loan for all regions, including the capital, now amounts to 6 million rubles,” the official document says.

As predicted by the “Free Press”, the authorities did not wait until the summer, and the “New Year’s gift” took place. Moreover, it was even aggravated by cutting the maximum loan amount. Which, as you might guess, will hit the real estate market in Moscow, St. Petersburg and all major cities very hard.

A third of the value of real estate at current prices is a lot, most Russians do not have such money. 6 million rubles of the loan with the indicated initial payment corresponds to 8.6 million rubles of the value of the property. In the capital, this money cannot even buy a one-room apartment yet. Or is it a calculation that prices are going to fall a lot?

“We believe that there are signs of overheating in the mortgage market, and one of these signs is the difference in prices in the primary and secondary markets. According to our data, this difference now stands at 42%. Such a gap creates risks primarily for citizens who may find it difficult to service a loan, but it turns out that housing on the secondary market is on average 40% cheaper,” says Elvira Nabiullina, head of the Bank of Russia.

There’s nothing wrong with logic here, that’s the way it is. Of course, the prices for the “primary” will collapse now. And for the “secondary”? Apparently, too, since banks have already begun to raise the cost of a “regular” mortgage. Immediately after the announcement of the new Central Bank rate, VTB announced this, which means that everyone else will soon catch up.

“The long period of validity of a high key rate is critical for the real estate market. In the secondary market, where there are no preferential government programs, rates can become prohibitive. If the key rate is kept at current values, this may significantly affect the volume of transactions in the secondary housing market in the first quarter. Which will entail a reduction in transactions in the segment of new buildings, as it was already in the spring of 2022 — citizens will not be able to buy new buildings with funds from the sale in the old fund,” said Tatyana Reshetnikova, deputy head of the mortgage department of the federal company Etagi.

But whether it will still be! The Central Bank is preparing new rules for regulating the mortgage market, aimed primarily at improving the quality of borrowers. This applies to both “preferential” mortgages and any other.

“We support the measures that the government is currently preparing to clarify the parameters of a “preferential” mortgage. In our opinion, this will lead to some cooling of the mortgage, but the main effect on the mortgage portfolio as a whole will be an increase in the key rate. Our macroprudential measures also have an impact, which will be further tightened from January 1,” said Elvira Nabiullina.

That is, there will be another additional kick in prices. Down, of course.

“After the increase in the Central Bank’s key rate and a significant increase in the cost of mortgages, we recorded a drop in the cost of “secondary” by about 5%. By the end of the year, current prices will not change much, and from the beginning of 2024, the rate of decline may accelerate and reach 20% by February,” predicts Yulia Usacheva, CEO of the real estate agency City Realtor Center.

However, this forecast was made before the Central Bank rate increase and before the publication of information about the “prohibitive” parameters of preferential mortgages. So it will be even more fun.

“I’m not ready to predict how much everything will fall, but prices will go down smartly and cheerfully. They have already gone, and for a long time, it’s just not accepted to talk about it. But now there may even be a collapse. I think it is pointless to predict something accurately, to give some figures. News affecting the market appears often nowadays, and before There will be more of them for the New Year too. Only one thing is clear — in the next six months or a year, or even more, it’s not worth buying anything,” says private realtor Tatyana Ivanova.

The “Arctic” and “Far Eastern” preferential mortgage programs will remain, and they may even be extended to the secondary market — there are not enough new buildings there.

“The family mortgage program can be extended after July 1, 2024. The government is now thinking about extending it. Of course, it should be based on the real possibilities of the budget. But it is better to think towards extending the family mortgage. There is a minimum down payment, 20%, and a rate of 6%, and if there are three or more children in the family, a housing subsidy is required,” Russian President Vladimir Putin said during a direct line.

However, all this will not affect the stabilization of demand in the real estate market in any way. Young families don’t even have enough for food, let alone for a mortgage, there are very few potential buyers here.

Everyone will go to the Far East and to Murmansk-Arkhangelsk, to buy new buildings there? It’s not even funny. And there is nothing to buy there, plans to extend preferential programs to the “secondary” did not appear from a good life.

The reverse side of the coin, of course, is also available here. Firstly, the authorities are about to be hit by a powerful attack from developers who have riveted entire cities — they are unsold and are already being destroyed. Moreover, the number of empty blocks continues to grow, for some reason the construction does not stop. The owners must be hoping for something.

Secondly, due to the change in the market value of real estate, banks will have to somehow reconsider their relationships with customers. Let’s say a person owes 10 million rubles, the rate is 15% per annum, a loan for 20 years. The pledged real estate initially cost 12 million rubles, but suddenly fell in price to 6 million rubles. At the same time, annuity payments were paid for only 3 million rubles in two years. What should we do next?

Of course, you will have to forget about 20 million rubles of potential profit, but this does not make it easier. I would like to get my own back. And there is a lot of it — the mortgage portfolio exceeds 16 trillion rubles! And if it is still secured by collateral, but in the very near future it may become very devalued. Apparently, the Central Bank will have to intervene again and resolve the situation. Which threatens systemic shocks throughout the Russian economy.

Thirdly, the situation on the building materials market will change. In theory, following a decrease in demand from builders — the construction of countless new blocks should stop — everything should become cheaper due to a sharp decrease in demand. But we live in a country where logic is completely perverted. The construction business, which has lost excess profits from developers, can, on the contrary, inflate prices for steel, cement, bricks, timber and plaster.

A sharp drop in real estate prices was inevitable, since the cost per square meter has long been inadequate for the incomes of the population. The preferential mortgage only supported this imbalance, and now it is gone. In general, the news is good, and all the “nuances” are, in principle, solvable.


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