The commission on preferential mortgages will be transferred to housing prices: the market is alarmed

“The rise in price of new buildings may renew interest in the secondary market”

Charging commissions from developers when issuing preferential mortgages creates risks, the Central Bank believes. The Bank of Russia believes that such commissions can be transferred to housing prices, which, in turn, will inevitably lead to an increase in the gap between the “primary” and “secondary” properties. Are there risks for mortgage borrowers? Can the developer increase the cost of square meters? How will the price gap between the primary and secondary markets change? Experts told MK about this.

Ivan Samoilenko, managing partner of the communication agency B&C Agency: “The commission that banks intend to charge developers when selling housing under preferential programs will definitely be transferred to prices. This means that the cost of real estate on the primary market can increase by 10%. This is the first problem for buyers, because over the past two years, real estate in the country has already risen in price by 60-90% (according to the Central Bank). The second difficulty is that the requirements for the initial contribution will become more stringent: if banks are already offering loans under preferential programs if the borrower has 30% of the cost of housing, this limit may increase. Which will become another difficulty for people who want to buy real estate with a mortgage at a preferential rate. Rising real estate costs and an increase in the amount of down payment will certainly lead to a reduction in demand in the market for new buildings. And this, in turn, will be a serious factor for the entire construction sector. Surely this year we will see a slowdown in the pace of commissioning of new housing. That is, the number of offers in new buildings will decrease, and the growth rate of the construction sector and related industries will slow down – this will already be seen by Rosstat in its assessment of GDP for the year.”

Valery Tumin, director of Russian and CIS markets fam Properties: “In fact, the situation now is such that the conditions for issuing preferential mortgages are becoming more stringent. Banks are trying to avoid losses. For these purposes, among other things, they plan to introduce commissions for developers who will work under preferential programs. They, in turn, also do not want to incur additional expenses, and since up to 70% of sales in new buildings are ensured by a mortgage – often preferential – increasing the cost of apartments by the amount of the commission looks like a very real step on the part of developers.

Market programs, due to the high key rate of the Central Bank of the Russian Federation, are today affordable for a wide range of borrowers. Since some banks have already limited the issuance of preferential mortgages to projects of partner developers, it turns out to be a vicious circle. If the authorities do not regulate this issue, I think that “primary” products will become more expensive. One of the large banks is introducing a commission of 7.5–11.5% of the loan amount for developers whose buyers take advantage of preferential housing loans, which means that developers will increase the cost of square meters in their own projects by at least the same amount.

A 10% jump in the price of an apartment is quite a lot, so buyers are likely to move on to wait for better conditions. This means that, given the general cooling in the market, over time, banks and developers will have to reconsider their pricing policy and offer some kind of discount – but this may take about six months. At the same time, such a sharp rise in price for new buildings may renew interest in secondary housing, because such a price change will somewhat smooth out the difference between markets and, even against the backdrop of standard mortgage programs, can make secondary housing competitive, and in some cases, more preferable than new housing.”