Mortgage market rules are tightening, and home loan rates will soon stop falling. Both the regulator of the Russian financial market and the bankers are waiting for difficult times in the real estate market, which is hanging in complete uncertainty. In fact, prices can fall “below the plinth” at any time, both potential buyers and developers understand this. The former are in no hurry, while the latter, on the contrary, are in a hurry to collect more money from the people.
“From December 1, 2022, the Bank of Russia established a premium on the risk ratio for mortgage loans in rubles provided for financing under an agreement on participation in shared construction (loans for DDU), with an initial payment of no more than 10%. The value of the premium is 2.0, regardless of the value of the borrower’s debt load indicator (LBR). The measure is aimed at limiting the practice of providing loans to DDUs with a low down payment,” the Central Bank said in a statement.
To put it simply: in the case when a loan is taken for the purchase of an apartment “at the stage of excavation”, that is, a house is being built by equity holders, then, in addition to the borrowed funds, they need to contribute their own. Moreover, more than 10%, otherwise the bank that provides the mortgage will have to raise the rate – the Central Bank will impose additional “fees” on it. And completely justified.
Building on credit without own funds is now very dangerous. The situation on the real estate market is simply awful, prices have already fallen by 15–20% since the end of February 2022 to this day, and the potential for their reduction is far from being exhausted.
“Secondary real estate in Moscow will continue to fall in price in the fall. The volume of supply still exceeds demand, although we see an increase in contracts with sellers and this is a common seasonal story. New interesting objects are starting to enter the market,” says the managing director of the Miel office network. Irina Pesic.
Realtors are cautious, they do not predict more than 15% “down”, although a number of experts stipulate that in the event of some “shocks” the cost of apartments may collapse altogether. Naturally, with such expectations, the regulator raised the risk assessment for DDU on mortgages. Indeed, at any time, a built (or, worse, unfinished) house can become cheaper by a couple of times. With zero or so initial contributions, people will simply refuse contracts, posting losses on the bank. If a decent amount is made, then construction will continue. Everything is quite logical.
It is worth noting that foolish bankers somehow transferred out, there are practically no such loans for DDU with a small down payment, this is only 0.3% of the market. That is almost zero. And those that are, are clearly issued for a reason – for their projects and their people. Nevertheless, the risks are growing, a fact, and the Central Bank decided to stop it. Correctly.
In general, the situation in the mortgage market is somehow strange. In the spring, it fell to the levels of 10 years ago, but in the summer, judging by the statements of the “experts”, it almost completely recovered and is catching up with the indicators of 2021. What is more than strange – someone obviously either does not finish something, or embellishes.
“In the housing market, there is a downward trend in prices, which also stimulates the demand for mortgages. In August, the cost of a meter of housing decreased in the Moscow region, most noticeably in Moscow. Demand flows from Moscow to New Moscow and the Moscow region due to cheaper housing and the fact that sellers in Moscow are holding prices in anticipation of an autumn recovery in the market, ”says the chief economist of the Central Federal District of the Central Federal District of the Bank of Russia Alexandra Lvova.
Actually, when everything is falling down, getting into debt in order to buy an asset that is getting cheaper is somehow not very logical… However, people need to be told something life-affirming. But various studies of various agencies and other “analysts” who have been trumpeting the growth of the mortgage market for the fourth month somehow do not have much confidence. These are clearly acting in the interests of real estate developers, who now by hook or by crook want to get rid of potentially dangerous assets. Houses with a high cost can bring them a loss at any time. So, we need to get rid of them urgently.
“Personally, I do not see any influx of mortgage holders, they disappeared in the spring and did not appear again. And all because prices are falling, and the end and edge of this process is not yet in sight. First of all, the market is pushed down by the fierce lack of money of people, the prices of food, clothing, and other essential goods are growing, but there is no salary. Yes, and unemployment is growing, and obviously not at the pace that the authorities say. Although even they seem to have ceased to portray puppy optimism here and predict an increase in the number of unemployed citizens. In general, people have nothing to pay monthly fees, just like there is nothing to dig for still very expensive apartments, ”says a private realtor Tatyana Ivanova.
“Mortgage at 0.01% per annum” – there are a lot of such advertisements now, but you should not trust it. In this way, deliberately overvalued objects are sold, which simply no one will buy for cash. Yes, and you will be charged a large down payment, so the bankers are insured against the fall in prices, which is expected by everyone. In general, the rates on loans for the purchase of housing, which seemed to be falling, stopped their decline.
“This time, the reduction of the key rate was less than at the last meeting of the regulator, in addition, the Central Bank said that the likelihood of its further reduction narrowed. Under these conditions, the cost of “long” money on the market has not changed much, so there are few opportunities to reduce interest rates on loans, including mortgages. Focusing on the rhetoric of the Central Bank, we can say that in the near future the market will take a certain pause and will stimulate potential customers, rather, with non-price conditions,” VTB said.
Moreover, cautious hints that the refinancing rate may stop falling are also not in favor of mortgages. And the entire real estate market as a whole, in which the share of borrowed money before the start of the special operation in Ukraine exceeded 90%. By and large, this can push prices to a new wave of decline, which will be extremely difficult to stop.
“Volatility was shaped by two main factors. Firstly, the competition for the buyer has increased due to the increased volume of supply. Secondly, the share of properties with an urgent sale has increased, where the owners are ready to reduce the price in order to speed up the transaction, ”explains the head of the Moscow sales department of the Etazhi company Andrey Serdyuk.
Yes, everything is exactly like that, in the struggle for a few buyers, developers are ready to reduce prices, they urgently need money. This is on the one hand. On the other hand, there are numerous “investors” who bought apartments, houses and plots in anticipation of rising prices, and they are used to the fact that real estate is constantly rising in price. After all, this has been the case for over 20 years. The economy for these small hucksters is a dark forest, in fact, it is an illiterate and greedy people. And here they are holding on.
However, as soon as demand falls to levels close to zero, and the likelihood of this is extremely high, “investors” may begin to spontaneously dump their assets. That will provoke an avalanche-like fall in prices. The financiers have an understanding of this, as well as the developers. That is why the latter are in such a hurry. On the contrary, ordinary citizens who need to solve the “housing problem” should not rush. You need to wait for certainty and only then make a decision.