Excessive demand for mortgage loans will decline in 2024

Russians’ demand for mortgages continues despite rising rates and tightening lending rules. Next year, the growth rate of portfolios may fall by half, ACRA expects. However, the boom in the mortgage lending market is causing experts more and more concern every month. They talk about the “antisocial consequences” of demand, which is fueled by banks and developers.

Kommersant got acquainted with the review of the development of the mortgage lending market prepared by the ACRA rating agency. The authors of the document expect a growth rate of the mortgage portfolio in the range of 10–15% in 2024, which is half the level of 2023, but more optimistic than the current estimates of the Central Bank. The regulator forecasts mortgage portfolio growth of 7–12% for next year.

In ACRA analysts’ estimates, the expected mortgage growth rate is based, among other things, on the forecast of the continuation of preferential mortgage programs in the second half of 2024, but taking into account changes in the “targeting” parameters of such loans, which are currently being discussed. Sberbank (occupies 55% of the mortgage market) also expects a slowdown in the market. The bank admits that in 2024 it itself will not reach the level of issuances in 2023 (according to the forecast, it will amount to 4.6 trillion rubles), up to a decrease of 20%.

For the market as a whole, in 2023, according to the Central Bank’s forecasts, mortgages will grow by 24–27%, despite regulatory tightening and rising interest rates (now on average exceeding 16% per annum).

Already at the end of ten months of 2023, the volume of the mortgage portfolio in Russia increased by 3.5 trillion rubles, or by 25%. According to the latest data, issuance volumes decreased slightly in November, but still remain quite high (see “Kommersant” dated December 22). “The increase in the key rate, designed, among other things, to curb the mortgage boom, on the contrary, provoked and continues to provoke lending, which, of course, occurs, among other things, through the use of various tools to artificially stimulate demand,” ACRA explains.

ACRA analysts see the reasons for the current rush of demand in the actions of both credit institutions and developers. For example, a number of the largest mortgage banks tried to “maximize originations” before the increase in macroprudential buffers from 1 October 2023 by offering below-market rates. Developers “in order to prevent a decline in the value of real estate, created an artificial shortage of housing, putting apartments on open sale only in small quantities, and also offered various “favorable discounts”.” The result of such actions, according to analysts, is a further increase in the cost of housing and, as a consequence, a decrease in its affordability for the population.

Elvira Nabiullinahead of the Central Bank, December 15:
“Where people take out loans at market rates, there is a significant slowdown in issuance, somewhere around 30% already. But preferential mortgages are really becoming more and more attractive to people.”

Bankers confirm “the presence of active demand for mortgages,” including due to ongoing changes in regulation. Before any change (be it the key rate or the terms of the programs), there is “advanced demand,” says Vadim Mamonov, director of Rosbank Dom. Thus, according to him, before each change in the key rate this year, “there was a rush of demand in each of the banks.”

As a result of the expectation of tightening lending conditions, the demand for mortgages in November-December turned out to be record-breaking, primarily for new buildings, agrees Anton Pavlov, Deputy Chairman of the Board of Absolut Bank. According to him, the Central Bank’s measures to cool the market “have already had an effect” and the number of applications for secondary real estate is declining. However, the top manager admits, there is still demand:

“Clients are applying for second mortgages due to lower property prices in this segment. Sometimes the cost per square meter is 20–30% lower than in a new building.”

On the primary market, the average cost per square meter is 145.9 thousand rubles. as of November 1, on the secondary – 101.7 thousand rubles, according to Sberindex data. “The difference in the cost of square meters allows us to partially compensate for the difference in rates,” explains Mr. Pavlov. Thus, on the secondary market, average rates are above 16%, while real estate on the primary market can be taken out on preferential loans at 6–8%.

According to Mr. Mamonov, next year “there will be no more excitement”: firstly, the market capacity is narrowing against the backdrop of high rates, prices, tightening program conditions, and secondly, clients are moving into a waiting mode for real estate price adjustments: “At at rates of 17–19% per annum, you can forget about market mortgages for some time, only if for small amounts and for a short period.”

Olga Sherunkova