State programs are expensive: authorities are looking for ways to gently curtail preferential mortgages

CrimeaPRESS reports:

Against the backdrop of an increase in the key rate of the Central Bank, experts say IRN.RU, the question of the advisability of extending preferential mortgage programs, which are too expensive for the treasury, is becoming increasingly acute. It is impossible to complete them abruptly and immediately — the construction industry sits too tightly on the needle of budget subsidies. It is very likely that the authorities will act as in 2021, that is, they will maintain support in depressed regions that are not interesting to developers without additional incentive, but will significantly reduce it in large cities with high migration flows, where cheap mortgages only inflate prices and reduce the affordability of housing.

State programs for subsidizing mortgage rates, in force since 2020, have led to distortions in the housing market, fraught with serious problems for the banking system, therefore the Central Bank is sharply opposed to their extension in its current form. Moreover, given the key rate of 15%, budget expenditures on these programs are growing at an explosive pace, which the Ministry of Finance does not like very much. (See “Extension of preferential mortgages: what’s good for developers is death for the budget and banks?”.)

However, an abrupt end to the “attraction of unheard-of generosity” could lead to a serious decline in the construction industry — according to the Ministry of Finance, 80-90% of new buildings in the country are sold under preferential programs. Of course, high mortgage rates can be compensated by a decrease in housing prices, but given that over three years the cost of a square meter, according to the Central Bank, has increased by an average of 90%, they will have to be reduced dramatically, which is not always possible. Not to mention that developers will desperately resist this.

Therefore, the Central Bank offers a compromise option: make preferential mortgages targeted or differentiate them taking into account regional characteristics.

Broad preferential programs are very useful as a temporary anti-crisis measure if demand declines sharply, but in the future it would be advisable to move to targeted preferential mortgage programs or at least differentiate them by region, where the pace of housing construction is low and the supply of housing is lowsaid the head of the Bank of Russia, Elvira Nabiullina, speaking in the State Duma.

According to the head of the Central Bank, massive subsidization of interest rates has led to regional imbalances: “We have a significant part of preferential mortgages taken in the capital’s centers, and investment housing is also bought here — people from other regions are trying to buy housing and, of course, we need to differentiate.”

The Central Bank is going to discuss with the government exactly how to differentiate.

I think we need to discuss with the government how to differentiate — the level of income of the population may be one of the criteria. I think we need to look at the level of mortgage penetration and housing construction,” noted Elvira Nabiullina.

Differentiation by region is, in fact, a variant of the politically correct curtailment of preferential mortgages of the 2021 model. Then, let us remind you, they did it simply and elegantly — they reduced the maximum loan amount to 3 million rubles, which immediately cut off overheated markets from budget subsidies. Now a methodologically more complex option is being proposed, but the result should be approximately the same.

And this is quite reasonable: maintaining cheap mortgages in depressed regions with low solvent demand will promote the development of housing construction in locations that are unattractive for developers on market conditions. At the same time, raising rates in megacities, where they built a lot even without any preferential mortgages due to high demand, will not collapse the construction industry, but will significantly reduce budget costs — it is in large cities that the bulk of the issuance of preferential loans occurs.

It is difficult to predict exactly how much the rate on preferential mortgages will be increased in large cities and whether the state program will be retained there at all. But you can focus on previous experience: in 2015 and in 2022, when the key rate was also protective, preferential loans were issued at 12%. Yes, in 2022, preferential mortgage rates were quickly adjusted, but then the key rate was reduced, not increased.

A rate of 12% is quite acceptable for borrowers — in any case, the secondary housing market felt quite comfortable at this level of rates. True, due to preferential mortgages, prices for finished housing are now lower than for those under construction with similar characteristics — in Moscow, for example, by 20-30%. Most likely, against the background of tightening the conditions of state programs, developers will launch new marketing mortgage programs. But in any case, a significant increase in the preferential rate will reduce demand and force developers to pursue a more adequate pricing policy. And this will benefit not only buyers, but also banks, which, due to the price gap between “primary” and “secondary”, accept overvalued collateral on their balance sheets, and, ultimately, the developers themselves. Because the longer the price bubble inflates, the more loudly it will burst later. It would be much better for everyone to deflate it gradually.

This material is analytical and is for reference and informational purposes only.

source: IRN.RU

Crimea news | CrimeaPRESS: latest news and main events