The price per square meter was predicted to decline due to a reduction in mortgage volumes

Experts assessed the pros and cons of reducing housing lending volumes in Russia

During the winter months of this year, the volume of mortgage loans decreased by 14.1% compared to the same period in 2022. The Bank of Russia reported this. At the same time, every second potential mortgage borrower received a loan refusal from the bank in January-February, according to data from the National Bureau of Credit History (NBKI). How will all this affect the country’s economy and are there any positive consequences from the decrease in demand for real estate for Russians?

In January and February 2024, the volume of mortgage issuance amounted to 604.5 billion rubles, which is 14.1% less than in the same months two years ago, when the volume of housing lending reached 704 billion rubles, according to the Central Bank. At the same time, the number of housing loans in January-February of this year also decreased by 10.7% compared to the same period in 2023 (171.5 thousand versus 192 thousand). At the same time, banks began to more often refuse loans to potential mortgage holders. According to NBKI calculations, during the winter months of this year the percentage of refusals reached 56%, which is 15% more than at the end of 2023. And if we look separately at the market for new buildings, which is subject to the maximum number of preferential programs, then the percentage of refusals there reached two thirds – 69% in January of this year and 65% in February.

According to the head of the Analytical Center “Real Estate Market Indicators” Oleg Repchenko, the mortgage market and the real estate market in general is cooling. It is being pressured by decreased demand against the backdrop of high prices and prohibitive rates on market mortgages (today the minimum rate is 16-17% per annum), as well as tightening conditions for issuing preferential mortgages and the introduction of prohibitive surcharges by the Central Bank. There is no need to expect a quick reduction in the key rate this time, as the regulator himself has repeatedly stated. This means that the market, including the mortgage market, will continue to cool.

Experts have differing opinions on how the observed decline will affect the construction industry, which is considered the “locomotive” of the entire economy. “We see no reason for this trend to have any significant impact on the construction industry,” says Alexey Novikov, director of the mortgage lending department at Est-a-Tet. As a rule, developers and banks offer clients various tools for purchasing apartments, such as subsidized mortgage loans, installment plans, etc., which greatly makes life easier for them and potential buyers. But this time all these techniques will not help developers. “The construction industry will face a busy period in the coming six months,” says Vladislav Preobrazhensky, executive director of the Moscow Investors Club. This may affect the speed of decision-making about entering new projects. If in the second half of 2024 the industry sees a pronounced trend towards easing monetary policy (and this will depend on the dynamics of the Central Bank’s key rate reduction), then significant changes will not occur. Here it is worth paying attention to the fact that a development project takes several years (on average 3 years) and short-term six-month fluctuations in the rate, although they carry certain risks, can be compensated within the project implementation period, the expert explained.

Analysts also differed on whether the decrease in demand for housing will lead to a decrease in the cost per square meter. So, according to Novikov, there are no prerequisites for this, since the high cost of building materials and project financing affects the price per square meter. “At best, one-time promotions or additional discounts from developers for a certain pool of apartments are possible,” the expert believes. However, calculations by other analysts are already showing changes. Under pressure from decreased demand, the housing market, at least the secondary one, will face stagnation and lower prices. “According to our calculations, the entire first quarter of 2024. the average cost per square meter is marking time,” Repchenko said. — At the same time, the most affordable segments are already showing a minus as of March. This means that apartment sellers have begun to realize the new reality of a high key rate and lost demand, and are slowly moving towards buyers.” Most likely, the cost of a meter on the secondary market will show a minus in May, and in the medium term it may drop by 10% or more, the analyst predicts.

There are other benefits for Russians in the cooling mortgage market. “A positive aspect could be a reduction in the debt burden of the population and an increase in the affordability of housing for buyers without a mortgage,” said Denis Astafiev, founder of the investment company SharesPro. At the same time, the reduction in demand stimulates the development of alternative forms of housing construction, such as rental and cooperative housing, which could lead to a more diverse and flexible real estate market for consumers, the expert emphasized.