Cancellation of preferential mortgages can “turn over” the housing market: is it time to buy an apartment now

A difficult situation is developing in the housing market today. This is due to the uncertain future of the program for preferential mortgage lending for new buildings.

Currently, in the draft state budget for 2023-2025, which was adopted by the State Duma in the first reading, not laid down funds to compensate preferential rates to banks. Deputy Minister of Finance Alexey Moiseev notedthat the Ministry of Finance does not consider it necessary to continue supporting the primary housing market – and proceeds from the fact that the preferential mortgage program will be completed on December 31, 2022. It is the 73 billion rubles necessary for these purposes that are now included in the draft budget.

Meanwhile, the Ministry of Construction has previously stated that the extension of preferential mortgages is important for the growth of housing construction, which will have a beneficial effect on the development of the economy as a whole. According to Deputy Minister of Construction and Housing and Public Utilities Nikita Stasishin, it is important for developers to understand that in the next three to five years they will have good demand. “And for this, preferential programs should still operate for at least this period of time,” explained deputy head of the Ministry of Construction.

In addition, in 2023 the Central Bank is going to deprive developers of the very popular “zero mortgage” mechanism – subsidized loans for the purchase of housing at a rate close to zero. It was this practice that made it possible to increase sales in the primary housing market in the summer months, pulling the buyer away from the secondary market.

“The Casket opens simply, but has a “double bottom”. The bank, by agreement, provides the borrower with a mortgage loan at a rate tending to zero, and the developer compensates the financial institution for the difference between its value and the base rate. At the same time, developers initially include their costs in the cost of the apartment – in the body of the loan, ”said Viktor Galkin, a real estate expert, to Rosbalt.

The Central Bank quickly drew attention to what was happening. “Now many, perhaps, see that there are really very low rates, even close to zero – the so-called mortgage from developers. But I would like to warn you that this is purely a marketing ploy and is very often associated with the fact that people buy an apartment at an inflated cost,” noted Head of the Central Bank Elvira Nabiullina. According to her, market mortgage rates cannot be lower than rates on long-term federal loan bonds (OFZ), and the housing market shows signs of “some overheating.”

In addition, the financial regulator warned in its report that developer-subsidized loans at “extremely low rates”, as low as 0.01%, pose a threat to the entire financial system, as they “increase the risks of a bubble – first through a technical crackdown in house prices, and then in the event of a bubble collapse.

Meanwhile, analyzing the situation, market experts note that against the background of the current situation of uncertainty, a drop in demand for new buildings is recorded today, with almost record volumes of housing commissioning. And it is obvious that if the preferential mortgage program is canceled, the interest of buyers in the offer of the primary housing market will decrease even more. This threatens the construction industry with serious problems, as well as related sectors of the economy. Probably, it is these concerns that underlie the decision of the Federation Council to recommend the government to consider extending the measures to support developers and the preferential mortgage program, which the Chamber of Regions approved at the November 16 meeting.

“I think that the market will be saved only by price cuts, and quite significant ones at that. In 2020 and 2021, with a decrease in the income of the population, housing in Moscow has risen in price by 50-70%. This is nonsense. It’s one thing when housing becomes more expensive in the face of economic and income growth, as it was in the zero years. Another thing is now. Therefore, it seems to me that the bubble that has inflated over these two years should burst, prices should return to the level of the beginning of 2020 – about 30% less than the highs that were reached in the first quarter of 2022, “he noted earlier” Rosbalt” head of the analytical center “Indicators of the real estate market” (IRN.RU) Oleg Repchenko.

According to experts, if the government nevertheless decides to abandon preferential mortgages, the focus of consumer interest from the overheated market of new buildings will largely shift to the secondary market, where apartments are sold at a significant discount.

As for the answer to the question of whether it is worth buying an apartment now, real estate experts offer to soberly weigh the situation and take into account all the pros and cons. “In my opinion, if you have the amount to buy an apartment, then you should pay attention to the “fresh” secondary housing, which may turn out to be no worse than the offer in a new building. This is usually a good quality housing located in a residential area. In addition, you will not have to listen to the noise of neighbor repairs for a year, ”notes Viktor Galkin.

According to the expert, by the end of the year, the market for mortgage new buildings will experience increased activity. This will lead to both the traditional seasonal revival of demand, and fears caused by rumors about the abolition of preferential mortgages. In this case, buyers will not pay much attention to the cost of the apartment. Meanwhile, according to Galkin, the likelihood of extending preferential mortgage programs – in its current form or in the form of new proposals for certain categories of buyers – is very high.

Another algorithm of actions offers Vice-President of the Guild of Realtors Konstantin Aprelev. Referring to the forecasts of experts about the expected decrease in the cost of housing in 2023 by 10-20%, he advises not to rush to buy an apartment, including with the help of a mortgage. The most profitable option in this situation, the expert considers rental housing, which costs 4-5% per annum of the price of real estate. The main accumulated amount can be put on a deposit in order to receive a percentage of the deposit.

“And when prices adjust by 10–15% by the fall of 2023 and the mortgage rate drops following the key rate of the Central Bank, you can buy real estate,” Aprelev believes. He also recalled that by 2024 the Central Bank intends to reduce the key rate to 4%. Its significant correction, according to the expert, may serve as a signal to start buying a home.

Maria Osadchaya

Source: Росбалт by

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