The subsidized mortgage program in Russia is coming to an end, which will bring changes to the real estate market and affect demand.
Launched in May 2020, the subsidized mortgage program offered loans for new apartments at 8% per annum. The program is set to conclude on July 1. Over four years, it became one of the most popular government benefits, even though property prices increased following its introduction.
The government will now shift to targeted mortgage lending. Programs such as family, rural, Far Eastern, Arctic, and IT mortgages, as well as preferential conditions for participants in special operations and residents of Novorossiya, will continue. The exact rates for these programs will be announced soon.
Julia Ruzhitskaya, a representative of a major construction company in St. Petersburg, told “Parlamentskaya Gazeta” that the remaining programs will likely see changes.
“For instance, the current family mortgage is available to families with children born before December 31, 2023, and does not account for firstborns in 2024,” explained the expert.
Ruzhitskaya believes that the remaining subsidized programs are unlikely to match the scale of the subsidized mortgage for new builds. However, their continuation will prevent the market from stagnating. She also suggested the introduction of new mortgage programs.
For example, large employers are increasingly interested in industry-specific mortgages. Companies are willing to partially compensate their employees’ down payments in exchange for state benefits. This trend may grow. Meanwhile, buyers without stable, high incomes will leave the market, Ruzhitskaya believes.
Anastasia Gizatova, CEO of an agency in Kazan, does not foresee a collapse in the real estate sector. In an interview, she pointed to the continuation of other mortgage programs, noting that housing demand will initially decrease.
However, this is unlikely to be a problem for developers, as they exceeded construction plans in the first half of the year and can sustain themselves with the profits from selling completed apartments for a few more months.
“And if the subsidized mortgage program continues, we won’t see the same activity, because people have already scraped together all their savings and invested in real estate,” explained the expert.
In the long term, developers may reduce the number of new projects. Konstantin Barsukov, a member of the Russian Guild of Realtors, shared this view. With low demand, starting new projects makes little sense, so developers will focus on selling existing properties and conserving funds. This could lead to a housing shortage in the future, he said.
To stimulate demand, developers might offer their own programs and schemes to ease the purchase of housing. Ruzhitskaya noted that many companies already use tranched mortgages, installment loans, and subsidized rates.
However, housing prices are unlikely to decrease. Gizatova noted that many Russians expect prices to drop with the end of subsidized mortgages, but inflation is rising, and real estate remains the most reliable way to preserve money, so a price drop is not anticipated.
On the contrary, the gap between the cost of primary and secondary housing will start to narrow, experts believe. There is potential for price growth in the secondary market, Barsukov noted. Price increases in this segment are expected to be gradual, reaching a peak in December. However, secondary market prices are unlikely to outpace inflation. Barsukov suggested that prices could rise an additional 5-6% over the next six months, with inflation at 8%.
Moreover, buying secondary housing often triggers a chain of additional purchases and sales, further driving price growth.
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