A rate of more than 20% may be critical for the real estate market
The Board of Directors of the Bank of Russia reports
Judging by the current trend, increases will continue, and therefore all buyers who were planning to purchase real estate should make this decision nowsays Anna Sapegina, deputy commercial director of the federal developer Neometry.
And many buyers agree with this. According to Nikoliers, in August 2023, the maximum number of mortgage transactions was registered in Moscow — 5,854 transactions in the primary housing market, which is 35% higher than in July and 49% higher than in August last year. Buyers were either rushing to get a mortgage under the terms previously approved, or taking out a mortgage out of fear that rates would rise even more in the near future.
For those who planned to buy real estate for investment purposes, conditions are getting worse.
An increase in the key rate will significantly reduce the investment attractiveness of real estate. Traditionally, after the Central Bank increases the rate, leading banks increase the yield on deposits. Those who have savings will certainly place them, even for a short period of timesays the President of the SRO “Regional Association of Appraisers” Kirill Kulakov.
He explains that only this trend will reduce interest in concluding equity participation agreements or processing mortgage loans. In addition, preferential mortgages, which are a market driver, are becoming more targeted. And the government also increased the down payment amount to 20%, rightly fearing a mortgage bubble in the real estate market. Thus, the funnel of initial demand for a mortgage will be significantly reduced.
By the end of this year, the volume of transactions involving mortgage loans will decrease, in particular due to an increase in the size of the down payment for preferential mortgage programs to 20%, — comments Kirill Golyshev, regional director of the residential real estate and land development department at Nikoliers.
Vyacheslav Priymak, head of the mortgage products department of Ingrad Group of Companies, agrees with him. In his opinion, an increase in the down payment from 15% to 20% has a strong negative impact on demand. Losses can be estimated at 10-20% of all transactions.
For any mortgage buyer, there are two dilemmas: the down payment and the monthly payment (derived from the interest rate). Both of these conditions are currently worsening,” Priymak complains.
But so far there is no talk of a significant reduction.
A rate of about 20% per annum can be considered critical for the market.Sapegina predicts.
In addition to the decline in demand for mortgages, experts fear a slowdown in the pace of new projects.
I think that small regional developers who have one or two projects will find themselves in the most difficult situation. Bankruptcies, mergers and acquisitions are possible here. True, provided that the Central Bank rate does not make a reversal in the near futuresays Kulakov.
But this expectation is hardly justified. Today, following the meeting, the Central Bank increased the forecast for the average key rate until the end of 2023 from 8.5-9.3% in July to 13-13.6%. The forecast for the average rate as a whole for 2023 was increased from 7.9-8.3% to 9.6-9.7%.
In addition, the Bank of Russia significantly increased the forecast for the trajectory of the key rate for 2024 — from 8.5-9.5% in July to 11.5-12.5%. The regulator narrowed the average rate forecast for 2025 from 6.5-8.5% to 7-8%. The forecast for 2026 was kept at 5.5-6.5% (this level is assessed as neutral).
At the same time, the Board of Directors raised the forecast for lending growth in the Russian Federation for 2023 to 14-18%. The forecast for mortgage growth rates for 24 has been kept at the same level — 17-21%.
The next meeting of the Board of Directors of the Bank of Russia, at which the issue of the level of the key rate will be considered, is scheduled for October 27, 2023.