Experts gave pessimistic forecasts for housing affordability in Russia

Experts summed up the results of the last year, revealing many contradictions between the appetites of developers, the financial capabilities of Russians and the planned abolition of preferential mortgages after July 1, and gave forecasts for the affordability of housing under different scenarios. And they (forecasts) are not encouraging.

The volume of housing commissioning in Russia in 2023 amounted to 110.4 million square meters – 7.5% more than in 2022. And in principle, the Ministry of Construction and Housing and Communal Services (Minstroy) proudly declares a historical record. For example, in 2018, when housing construction accelerated thanks to the efforts of powerful “locomotives” in the government, 75.6 million “square meters” of new housing appeared in Russia, in 2019 – 82 million (feel the difference with the current result). However, there will be many more records (as well as contradictions) ahead.

In 2030, according to the state program, the Ministry of Construction should build 120 million square meters of housing.

For whom is all this beauty being built? Is it really for people? Or maybe for beautiful reporting?

According to Rosstat, in 2020 there were 26.9 square meters per person, and in 2021 – already 27.8. According to the plans of the Ministry of Construction and Housing and Communal Services, by the end of 2024 the figure should be 29.3 “square meters” per Russian, and by 2030 – 33.3. It’s not very luxurious – the average family of parents and a child will have an apartment measuring a hundred meters, and if there are two children, then generally 133 meters. We only have to wait 5-6 years. True, what exactly will change in the country’s economy by that time is unclear, but it’s cool to catch up and surpass the whole world, at least on paper!

According to Rosstat, the cost of apartments in new buildings in Russia is not comparable with secondary housing: 140 thousand rubles versus 97 thousand – one and a half times higher. Well, the difference between preferential and market rates is colossal: 8% versus 17–18%—more than double. You don’t need to be an economist to understand why Russians prefer to buy apartments not on the secondary market, but in new buildings, even taking into account higher prices per square meter.

However, this is not all records and contradictions.

Senior project leader at Frank RG, head of the Mortgage project Olga Filippova told MK that if you look at the dynamics of the issuance of mortgage loans by month last year, you can see an unusual distribution. Usually November-December are months of high demand, when people buy apartments, including due to promotions. But last year the busy months were August and September.

Why did it happen? The information background played a role, to which clients succumbed: they say, mortgage conditions will be tightened, potential surcharges will be introduced, etc.

All this provoked doubtful Russians. People wanted to take out a loan on more favorable terms. As a result, mortgages worth almost one trillion rubles were issued in September – this is a lot, a market record since the beginning of the history of observations.

In January 2024, after the introduction of surcharges and an increase in the down payment on preferential mortgages to 30%, people began to take out much fewer loans. Issues dropped by 65% ​​compared to December 2023.

From January to August 2023, while the market was stable, the average purchase price for housing in Russia was 3.7–3.8 million rubles. And then it started. As soon as the number of mortgage loans issued began to grow (since August), the average bill went up, jumping to 4.3 million rubles by January 2024. And it’s not a fact that for this money this year Russians bought the same number of meters – rather, even slightly less due to the rise in the cost of a “square” by 10-15%.

What follows is even more interesting. Another record for 2023: 58% of mortgages were issued under government programs. And for the first time, family mortgages began to prevail over “classical” preferential ones: 45% versus 42% in the structure of state programs. The remaining shares fall on IT mortgages (7%), Far Eastern and Arctic (4%), rural and military mortgages (one percent each).

The reason for the “cooling” of Russians towards preferential mortgages is again clear: primarily due to the increase in the down payment to 30% (for a family it is still 20%). Let’s do the math: in regional centers the cost of an apartment in a new building is 5–10 million rubles. This means that a person must accumulate 1.5–3 million in order to be admitted to government lending.

Let’s say we are dealing with a non-poor Russian with a salary of 80 thousand rubles, without financial responsibilities towards his family and parents. Well, there’s good news. If this person does not eat or drink anything, does not pay for utilities, buy clothes and shoes for himself, travel and go to the pool, he will accumulate this amount ideally in a year and a half. Ask how? You can sit on your family’s neck or become a gigolo (no, but what can you do?).

An unpleasant trend is observed in such a specific indicator as the housing affordability index. It is calculated as the number of square meters that a family of two can buy with a 25-year mortgage.

If throughout 2021 people could afford to buy apartments with approximately the same number of meters both in new buildings and on the secondary market – 108 and 101, respectively, then soon due to a sharp increase in the key rate the indicators changed significantly.

In March 2022, Russians could purchase 97 square meters on the primary market, but in the old fund – only 42. Then the key rate soared to 20%, interest on market mortgages became prohibitive (up to 25%). Russians have lost the opportunity to sell the housing they live in and move to an apartment of comparable size in a new building. Over the next two years, the situation only worsened, the imbalance between prices for primary and secondary housing continued to grow.

Now some predictions. At the end of 2023, the volume of mortgage loans issued in Russia reached a historical maximum of 7.9 trillion rubles. Presumably, the amount issued in 2024 will be almost a quarter less – 6.2 trillion. Analysts attribute this decline to the fact that high rates on market mortgages will remain until mid-summer; people will not be able to afford to be harnessed to enslaving conditions.

Do experts allow the complete abolition of preferential mortgages? No – the construction lobby is too strong and will not allow its margins to be reduced. The fact is that, according to Rosreestr, most purchases on the primary market – 85% – are carried out with a mortgage. In the secondary market, the share of housing lending is three times less – 29% (and the cost of apartments, we recall, is one and a half times lower). Preferential mortgages will go away – Russians will simply stop buying primary housing at current prices and will switch mainly to exchange transactions on the secondary market, as in the Soviet Union.

…At the end of last year, in an interview with MK, the vice-president of the Russian Guild of Realtors, Konstantin Aprelev, recommended that people for whom the solution to the housing issue is not super urgent should wait until September 2024. And it seems that this recommendation is truly the best. If you didn’t live well, there’s no need to rush.