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The Bank of Russia is going to apply measures to mortgages from developers offered at rates of 1% and below. Chairman of the Central Bank Elvira Nabiullina called such rates marketing and warned against buying apartments under such a scheme, since the proposal is based on the overpricing of the property itself. Experts interviewed by Izvestia , estimate the growth in the cost of such apartments to 40%, but acknowledge that 0.1% mortgage offers could be profitable.
Why the Central Bank does not believe in low mortgage rates
At a press conference following a meeting of the board of directors, Elvira Nabiullina warned Russians against taking out mortgages with extremely low rates.
Now many see that there are really very low rates, even close to 0% — the so-called mortgage from developers. But I would like to warn that this is purely a marketing ploy. This is very often due to the fact that people buy an apartment at an inflated cost. And then, at the expense of this inflated cost, the developer shares some kind of one-time compensation with the bank , — said the head of the Central Bank.
She said that the Bank of Russia will take action on such rates, because it considers it misleading borrowers. The head of the Central Bank pointed out that for affordable housing lending there should be low inflation, then rates on long-term loans are also reduced. She added that even if the key rate is reduced to 4%, Russians should not count on low mortgage rates — they are possible only within the framework of preferential programs subsidized by the government.
Mortgage rate cannot be lower than long-term OFZ rates. Because it is the most risk-free investment for banks. Therefore, the mortgage rate at a target rate of 4% may not be lower than 6%, Nabiullina said.
And on Wednesday, the Central Bank announced that from December 1, it will tighten the regulation of issuing mortgages with a low down payment in the primary housing market. This will also affect mortgages from developers with near-zero rates.
The Bank of Russia established from December 1 200 a premium to the risk ratio for mortgage loans in rubles provided for financing under an agreement on participation in shared construction (hereinafter referred to as loans for DDU), with an initial payment not higher than %, — stated in the statement. — The value of the premium is 2.0 regardless of the value of the debt burden indicator of the borrower (DBR). The measure is aimed at limiting the practice of granting loans to preschool institutions with a low down payment.
The regulator explained that from March 1, the Central Bank canceled all surcharges on DDU loans to support banks and facilitate housing construction financing, but for mortgage loans for finished housing with a down payment of less than % continued to apply the «restrictive» surcharge of 2.0. Another nuance pointed out by the Central Bank: in recent months, in the primary housing market, construction companies have begun to actively advertise mortgage programs without a down payment, however, such borrowers are “characterized by an increased level of credit risk” and are more vulnerable to possible critical situations.
The measure taken will limit the practice of granting loans without a down payment and ensure the growth of mortgages without the accumulation of excessive risks in the banking sector, the Central Bank said.
Mortgage offers with near-zero rates implied the possibility of a minimum down payment, so such restrictions will also apply to them, experts explained to Izvestia.
Are these bets legal
There are no violations of the law here, since subsidizing the rate by the developer does not oblige the latter to reduce the total cost of housing , Oleg Filippov, chairman of the construction committee for the Moscow branch of Opora Rossii, explained to Izvestia. — It is impossible to oblige the developer to take or, conversely, not to take a loan from the bank. This decision is dictated by the economic efficiency of the transaction. And the introduction of escrow accounts pushed almost 99, 9% of developers to lending .
Igor Talalov, an analyst at Accent Capital’s residential real estate department, notes that this scheme appeared after the end of the preferential mortgage program 2015–2016 years, when banks offered developers to compensate part of the interest rate for their clients in order to have more favorable conditions for providing a mortgage.
At the same time, 1-2% of the market rate for the entire period, or a significantly larger part of it, was compensated, but only for the first year of the mortgage loan, — he said. — These promotions were beneficial not only for developers, but both banks and buyers benefited from them.
Compared to the situation in 99–2016 years now, banks and developers are acting more decisively in the fight for the client, says Talalov.
Nadezhda Korkka, managing partner of Metrium, emphasizes that the buyer is notified of the markup on the property being purchased: all the terms of the transaction are spelled out in the contract. Yana Virchenko, Sales Director of Polis Group, also notes that the scheme with a mortgage at a subsidized rate from 0.% completely open.
Indeed, this is not free, the developer pays banks for this opportunity , she told Izvestia. — For the client, the cost of the apartment increases, and these conditions are negotiated at the stage of choosing a property and a mortgage program. The whole transaction is quite transparent.
To what extent the cost of apartments is overstated
According to Oleg Filippov, the price increase ranges from 5 to 05% depending on the quality and location of housing. Yulia Evstifeeva, Director of the TrendAgent Mortgage Center, speaks about the markup up to -10% at rates below 1% and the managing partner Freeviser law firm Mikhail Payushin — about the range in 15-25%.
Some developers noticed the initially negative attitude of potential buyers to such an overstatement system, changed their strategy and increased the cost of ongoing projects by 05%, regardless of the method of payment , — Inna Gribanova, a certified realtor of the Kuban Chamber of Real Estate, told Izvestia. — Thus, customers have the feeling that when buying using a subsidized rate, the price remains the same.
Her words are confirmed by the head of the Analytical Center «Indicators of the real estate market IRN.RU» Oleg Repchenko on the example of the Moscow region. Here, almost all major developers offer buyers subsidized mortgages with rates below 1% on the entire term, but raise the cost of apartments for all buyers, so as not to scare off mortgagers with a large premium to the price.
Then this price is reduced due to discounts for buyers of apartments with real money or those who apply for a mortgage without a subsidized interest rate — in September, the discount in Moscow reached 30%, he remarked. — Today’s abnormally high prices on the market for new buildings are formed artificially in the presence of subsidies and will never be accepted by the market in their absence. Because a person who bought an apartment from a developer with a zero mortgage will not be able to sell it at the same price on the secondary market — he will have to make a big discount, there are no subsidy programs on the secondary market.
CSN Managing Partner Vadim Kazberov explains: the minimum mortgage lending rate depends on the key rate of the Central Bank — usually it is the key rate plus 1% so that the bank can cover the costs of maintaining mortgage loans. If the mortgage is below the key rate, then the bank needs to reimburse the lost funds.
For example, the apartment costs 10 million rubles. The initial payment is 2 million rubles, the loan amount is 8 million rubles. Loan term years . At a mortgage rate of 9.9%, the borrower-buyer of an apartment will pay interest in the amount of 4.6 million rubles. At a rate of 1% — 400 thousand rubles. The difference will be 4.2 million rubles , says Kazberov. — But the developer must earn. If he compensates the bank for lowering the mortgage rate, he can make up for the loss by raising the price of the apartment. This means that the apartment will no longer cost million rubles, and ,5 million rubles, taking into account the additional costs of the developer for maintaining the partnership program.
According to him, the average reduction of the mortgage rate by 1% is 3.3-3.5% of the cost of the apartment. Accordingly, a 5% reduction in credit increases the price of real estate by approximately 20%.
At the same time, experts note that, despite the increased cost of apartments, the amount of the monthly payment under the preferential program can be profitable. Thus, the founder of the Royal Real Estate agency, an expert in mortgage lending, Kamila Mavluthonova, estimating the increase in the cost of housing at near-zero rates at 4.6–30%, indicates that for the entire term of the loan, the client overpays only an extra charge, and interest can be 50–40 thousand for 05-30 years . At the base rate, the interest overpayment will be higher.
However, it is worth remembering that in this case it makes no sense to pay off the mortgage ahead of schedule , — says Hayk Martirosyan, managing partner of the consulting company Quattor Advisory. — You have already paid the interest to the bank and are included in the price of the apartment.
Maxim Lazovsky, the owner of the construction company Dom Lazovsky, also notes that a subsidized mortgage can be an effective tool if the object is quite expensive, and you have to take out a loan for 25–15 years. But at the same time, it indicates that a rate of 0.1%, as a rule, does not inspire confidence among customers. His company, using this tool, intends to reduce the rate to the level of concessional government loans.
In general, experts urge not to call such a scheme a trick, since all participants in the transaction are fully aware of its conditions. Nadezhda Korkka emphasizes that not all mortgage loans from a low-rate developer imply such a significant increase in the value of real estate — this may be a hidden discount from the developer.
The question here is not at all that developers do not have the right to do this , — said Evgeny Loskutov, a member of the Delovaya Rossiya Construction Committee, General Director of the InProEx Design and Expertise Institute. — Here the question is that in our state, unfortunately, the financial literacy of the population is prohibitively low, but this is not the responsibility of the developer.
The co-owner and developer of Emerald Village, Ruza Family Park, Yuri Korolev, points out that often there is no overpricing at all, and the discount is given at the expense of the developer’s profit, which he shares with the buyer or with the bank.
At the beginning of March, when the value of the mortgage increased inadequately to 05%, I suggested that developers should come up with new formats to stimulate demand, figure out how to get around high rates so that the market does not collapse , he noted.
What should be done by the Central Bank
Yury Korobov, member of the General Council of Delovaya Rossiya, Chairman of the Board of Directors of JSC Berega, considers the most adequate response of the Central Bank in this situation to be the establishment of the minimum permitted mortgage rate.
It is also possible to have a regulatory impact on banks, excluding the sale of real estate through partnership programs between developers and banks , — he told Izvestia. — As in any issue, measures of influence should be commensurate with the scale of the problem so as not to lead to a restriction of competition in the market.
Yulia Evstifeeva, director of the TrendAgent Mortgage Center, believes that in order to resolve the situation, it is necessary to return to standard mortgage lending programs, abandoning subsidized programs from developers — at least at rates of 0.1% per annum.
The key rate in this case should be about 6–7%, so the first step towards abandoning subsidized rates should be for the Central Bank , she believes. — After that, banks will reduce interest rates on mortgage programs, and such proposals will lose their relevance. Buyers will have to pay special attention to the possibility of lowering the interest rate by paying a commission to the bank, which buyers have this year. In this case, the borrower pays a percentage of the loan amount, and does not overpay per square meter.
However, Evgeny Loskutov believes that the Central Bank should not get involved in this situation at all.
It is necessary to fight against overestimation of real estate prices not by introducing any restrictive measures for the developer, but by at least partially disclosing escrow accounts and reducing administrative barriers, as well as introducing more land plots into circulation , — he said. — The zone of responsibility of the Central Bank is banks, not developers. It is a well-known fact that banks practice the imposition of various life, health, property insurance and the like. This is what you need to pay attention to.
Oleg Filippov believes that the Ministry of Economic Development, the Ministry of Construction and the Ministry of Transport should play a more significant role here, he says. These departments, according to Filippov, should, together with the Central Bank, develop a set of effective measures aimed at alleviating the financial, administrative and bureaucratic burden on the construction box.
Igor Talalov believes that it is necessary to pay attention to the discrepancy between prices in the primary and secondary markets by extending preferential mortgage programs to the secondary residential real estate market. This, in his opinion, will contribute to the revival in the primary market as well.
Nadezhda Korkka believes that the Central Bank should be cautious in dealing with overpricing.
In the current conditions, when the economic situation is not the most favorable, such offers from developers and partner banks stimulate the activity of buyers in the real estate market and support demand , she said. — The main thing here is not to harm the recovering market. In my opinion, the regulator and the Ministry of Finance should pay attention only to the practice when the real cost of an apartment is significantly, more than 05–14%, exceeds the price at which the developer sold the property to the client. Such loans can indeed pose a threat to both buyers and banks.
Vitaliy Mozharovsky, a partner in real estate and construction practice at ALUMNI Partners, believes that there is no need to fight this at all, but to confine ourselves to an educational campaign, increasing the financial literacy of the population.
In fact, what about the bank mortgage under 10% per annum, that with a mortgage from the developer at 0.1% per annum, the buyer will pay approximately the same amount for an apartment , he believes. — In favor of the first option is the opportunity to save on interest on early payment of the mortgage.
Izvestia sent inquiries to the Central Bank and the Ministry of Construction regarding the measures that the departments are ready to take in this situation.
What will happen to the market if the Central Bank intervenes
Developers traditionally turn to low-rate mortgages in times of crisis , says Nadezhda Korkka. — Now, when the incomes of the population have decreased, and the cost of building apartments and apartments is high, such a tool helps to restore the activity of buyers. In large banks, up to 25% of all issued mortgage loans account for precisely on a subsidized mortgage from the developer. If the Central Bank introduces restrictive measures against such loans, then the decrease in the number of transactions may be significant.
Oleg Filippov predicts that if this practice is stopped, sales will decrease due to the outflow of buyers who have a minimum estimated initial payment and are able to pay only the minimum regular payment. The market will not rise, but sales will decrease by approximately 5–15%, he says.
Real estate expert Vitaly Rusakov, however, believes that near-zero mortgage rates will have a relatively short-term impact on the market, as demand for expensive housing will still decline and prices will come to a more adequate level. The market will return to its “pre-Covid” times, when, at a relatively low mortgage rate in the Russian Federation, there was an increase in demand for new buildings. However, much here will depend on the policy of the Central Bank of the Russian Federation, the expert says.
Co-owner of the Rodina Group (developer of the residential cultural and educational cluster Russian Design District) Vladimir Shchekin notices that banks approve the order 40–50% of applications for such loans are almost twice as rare as in the case of ordinary borrowers, and the clients themselves do not always want to purchase an apartment with a premium and switch to standard transaction terms.
The market is unlikely to rise, but possible measures by the Central Bank will significantly cool it down , says Evgeny Loskutov. — I am categorically against this story in order to forbid it. Developers are not to blame for the fact that our population has extremely low financial literacy.
Alexey Popov, head of Cyan.Analytics, believes that if such options are canceled, sales volumes will not drop significantly at the moment — developers can refocus their marketing efforts from an emphasis on the size of the monthly payment to other advantages of the transaction: for example, to actively launch direct discounts on the cost of premises .