Mortgages at 14-16% will become a «cold shower» for the secondary housing market. Declining demand and prices after the hype?

CrimeaPRESS reports:

The increase in the key rate of the Central Bank — first to 8.5%, and then to 12% — led to a surge in demand in the secondary housing market in Moscow and the Moscow region, which realtors are already comparing with the March hype in 2022. However, the hype will not last long, respondents are sure IRN.RU real estate agencies — mortgages at 14-16% will deprive the secondary market of 10-20% of customers.

According to the results of July, the Rosreestr’s office in Moscow registered 14,932 transfers of rights to real estate as part of housing purchase and sale transactions. Although demand slightly dipped compared to June — by 5.2%, the market remains active: compared to a good July 2021 for the market, the number of transfers of rights increased by 10.8%, and compared to a «bad» July 2022 — by all 79%.

Now the market activity is about 15-20% higher than it usually happens in summer, and we have not seen such a revival in the last 5 years— notes Sergey Shloma, director of the «Secondary market» direction of the company «Inkom-Nedvizhimost».

In Incom, the number of advances and transactions in July was 110% higher than in July last year. In TSN Real Estate offices operating in the secondary housing market of the Moscow Region, potential demand (requests for the purchase of apartments) in July increased by about 25% compared to July 2022, and real demand (advance payments) — by 52%.

A similar situation develops in August — the demand for apartments in the first half of the month became 15% higher than in the same month a year earlier— adds Lidia Kainova, head of the TSN Real Estate office in Shchelkovo.

Other real estate agencies also report a surge in buying activity.

For the third week (August — editor’s note), we have seen a consistent increase in the number of calls from buyers. Growth against the same period in July is 20%— says Alexander Moskatov, managing director of the Miel network.

According to Yevgeny Shavnev, the general director of the investment company in the real estate market LLC Flip, the number of applications, advances and transactions in the company in August increased by a factor of two compared to the previous period of last year, on average twice, compared to July, an increase of an average of 15 -20%.

In general, as IRN.RU predicted, the increase in the key rate on July 24 and August 15 and the unstable economic situation associated with the depreciation of the ruble ensured a surge in demand in the real estate market.

First, the instability prompted citizens who keep their savings in rubles to enter the market in order to invest in «hard currency», that is, real estate. Secondly, an increase in the key rate always automatically leads to an increase in the level of interest rates on mortgages, so at the moment the activity of buyers who want to have time to buy an apartment on credit on the old terms has increased— says Lydia Kainova.

In general, the situation in the secondary market is not much different from that in the primary market. Unless the mortgage holders in the «secondary» reacted to the increase in the «key» especially nervously, since there are no state preferential programs with fixed rates in the secondary market.

We also see some concern among buyers who are stuck in the market and hesitate to make a decision. Today marks certain deadlines that make them decide to buy faster. The situation is similar to the picture of March 2022. People who have approved loans will try to close deals as quickly as possible, — notes Alexander Moskatov, managing director of the Miel network.

Against the backdrop of active demand in the market, the volume of liquid supply continues to decline. “We began to observe an increase in demand in the secondary market since mid-March of this year: the number of incoming calls with a “buy” request has doubled on average compared to the same period last year. Demand was converted into transactions, which led to a reduction in supply, which fell by 15.5% from March to July. There is no need to talk about a shortage of lots yet, but buyers are already having difficulty choosing a liquid property,” says Alexander Moskatov.

Inkom does not report a decrease in the total volume of supply — according to the company, this figure even increased in July by a symbolic 0.4%. However, Sergei Shloma emphasizes, the exposition accumulates low-liquid, uninteresting objects for buyers — overvalued, with low quality characteristics.

According to the analytical center of the Inkom-Nedvizhimost company, 88.05 thousand lots are put up for sale on the secondary market of the «old» Moscow (of which 83.74 thousand pieces are apartments, 2.59 thousand pieces are rooms, 1.72 thousand pieces — shares). Over the month, the volume of supply increased by 0.4%, over the year by 22.7%.

In New Moscow, buyers are offered 8.48 thousand secondary objects (8.34 thousand pieces — apartments, 60 pieces — rooms, 80 pieces — shares). In relation to the June indicator, the exposure decreased by 1.1%, compared to July 2022, it increased by 28.1%.

In the Moscow region, the secondary exposure includes 72.53 thousand lots (70.37 thousand pieces — apartments, 1.65 thousand pieces — rooms, 510 pieces — shares). Over the month, supply decreased by 0.1%, over the year it increased by 27.1%.

The surge in buying activity was also reflected in prices. According to the analytical center www.irn.ru, in July the average cost of a meter in the secondary market of «old» Moscow increased by 1.1%. This is not much, but for the entire first half of 2023, capital apartments have risen in price by only 1.2%. «Resale» in New Moscow and the Moscow region for the month added an average of 0.5% and 0.6%, respectively — see the review of the real estate market from IRN.RU.

The size of trading in the secondary market remains within 5-10%, according to «Etazhi», but sales with discounts have become less — 70% of transactions against 80% in June, calculated in «Inkom».

Now sellers advertise their lots at a slightly inflated price, suggesting bargaining, but due to high demand, 30% of apartments are bought without bargaining. At the same time, some low-budget liquid objects can be sold even for 200-300 thousand rubles. more expensive than originally expected — about 10% of them in the mass segment, — says Sergey Shloma.

However, most likely, the hype and the «price rally» in the market will not last very long. The weakening of the ruble and the increase in the key rate of the Central Bank by no means increase the solvency of buyers, but only ensure the early implementation of demand — people who planned to buy an apartment in the coming months are buying housing now. And this inevitably leads to the exhaustion of future demand. The sharply risen in price mortgage, of course, will also put pressure on demand and prices.

An increase in the key rate by 4.5% over two months is significant and, no doubt, mortgage buyers will feel it. And overall it could be a cold shower for the high demand we’ve seen over the past few months. As a rule, the effect of a rise in the cost of a mortgage loan begins to work in about 2-3 months. Since for all already approved mortgage lenders, approval is valid during this period. However, now the question is not only how much banks will raise rates, but also whether they will keep the decisions approved earlier during the validity period. From the first reaction of the banks, we see that some are very hasty are trying to adjust market mortgage rates to the new conditions. We expect that the mortgage rate in the secondary market (maybe not immediately) against this background will rise to 14.5-15%— predicts Alexander Moskatov.

The director of Etazhi Prime, Rigina Gordeeva, does not rule out that rates on the secondary market will rise even more — up to 16%, «which will make mortgages on the» secondary «very expensive» and «will push the market even more towards new buildings.» Gordeeva already sees signs of a return of demand from the secondary to the primary market.

According to Lidia Kainova, the decline in demand for «secondary» will pull prices down. In general, she believes that the situation of spring 2022 may repeat itself:

If we draw a parallel with the spring of last year, when the Central Bank raised the rate immediately to 20% per annum, then this first led to a rush in demand in the hope of closing the purchase on already approved loans with old rates and rising prices. Then the real estate market literally stood up until the end of spring, applications for mortgage loans were sporadic, demand and the number of transactions fell, prices pulled down. It is likely that we will see about the same reaction now.

source: IRN.RU

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