The cold wind of correction has blown through the housing market

At the beginning of autumn, the availability of new housing in Russia fell sharply. Many developers' sales have collapsed. And not only in the Moscow macroregion, but in all regions of the country. According to experts, the unpleasant trend for potential buyers and builders was formed by three factors: the end of preferential mortgages from July 1, a significant tightening of the conditions for the family program and the Central Bank’s policy of increasing the key rate, on which the cost of market loans depends.

Let us remember that in 2020, preferential mortgages were launched, which were designed to support citizens who want to improve their living conditions and the construction industry as a whole during the pandemic. The coronavirus epidemic has passed, but the program, beneficial for developers and bankers, remains. As a result, analysts recorded a parade of records in the financial sector.

“Over the past 2023, the highest figures for the number of mortgage loans issued have been recorded since the launch of preferential mortgages in 2020. The amount of mortgage housing loans amounted to 7.7 trillion rubles, of which almost half (3.3 trillion rubles) were for new buildings,” Tatyana Podkidysheva, executive director of the NDV Supermarket Real Estate company, told MK.

According to the expert, the share of preferential mortgages was more than 80% in the issuance structure. Low-rate loans, available to any borrower over 18 years of age with a Russian passport, encouraged consumers to actively buy real estate to improve their living conditions or as an investment and preserve their savings.

“During the duration of the preferential mortgage, prices almost doubled: in Old Moscow - by 93.5%, in New Moscow - by 77%, in the Moscow region - by 91%. If in the Old Moscow market in 2020 the average one-room apartment cost 9-9.5 million rubles, today its price varies between 16-20 million rubles. There is no need to talk about the affordability of housing at this price level,” says Podkidysheva.

As a result, the share of preferential mortgages during its operation from 2020 to 2024 increased by 18%, from 60% to 78% - this burden fell on the state, which began to pay banks for home buyers.

However, after the abolition of preferential mortgages, as well as the tightening of conditions for the family mortgage program, the volume of loans issued for apartments in new buildings fell in just one month by 75% in Russia and by 73% in the Moscow region.

Moreover, the possibilities of a family mortgage are also not unlimited, the analyst noted: “There are state-defined limits on family mortgages, the completion of which in large banks will lead to an even more systemic crisis in the market. For example, it became known that Sberbank has already exhausted the funds allocated for its implementation. And it accounts for almost 60% of loans in the mortgage market. Limits are coming to an end in other large banks, so the terms of this program will be reviewed in the near future,” Podkidysheva is sure.

Unaffordable housing loans in the overheated primary market predictably led to a significant drop in sales. “In general, in the Moscow agglomeration they decreased by 40% in July and by 28% in August. In September, the downward trend continued. And according to preliminary estimates, sales volume may decrease by 20% compared to August. We are seeing the greatest decline in purchasing activity in the mass housing segment, where since 2020 the main way to purchase real estate has been a preferential mortgage,” the expert emphasizes.

According to NDV Supermarket Real Estate, indicators for the mass segment in Old Moscow fell by 62% over the year, in New Moscow and the Moscow region, the latter of which is represented mainly by comfort-class housing, by 56% and 62%, respectively.

As a result, the rise in mortgage rates led to a significant drop in sales in both the primary and secondary markets. In the Moscow agglomeration over the year it amounted to 57%, with a decrease in the share of mortgages by 15%.

“Low consumer demand has significantly reduced the income of developers: compared to the active August 2023, they decreased by 46%. To rehabilitate the market, comprehensive support measures will be needed, which may include our own subsidized rates, combined programs of long-term installments and mortgages. If possible, installments for the down payment using maternity capital,” Podkidysheva clarifies.

However, according to the expert, installment plans will not be a “lifeline” for developers: it slows down the filling of escrow accounts and the implementation of the sales plan. Moreover, in the mass segment it works less efficiently and can only be used in high-budget projects.

“Unfortunately, in the current realities, there is no universal “cure” for developers. Each specific case requires its own individual action plan. A thorough audit of the commercial department, analysis of pricing mechanisms, review of the marketing strategy, analysis of competitors and internal business processes will help find solutions to problems and points of further growth,” says the expert.

In conclusion, an interesting fact: prices for new buildings have so far not noticed the above trends. According to analysts of the BEST-Novostroy company, at the end of September the average price of 1 sq. m. meters on the Moscow primary market continued to grow, as did the average cost of a lot. A square meter of Moscow new buildings rose in price over the month by 1.5% to 583 thousand rubles, a lot increased in price by an average of 2% - to 34.1 million rubles. Let's hope that this is the last jump before a protracted wave of price correction.