Own housing is becoming less and less affordable
2024 could be the worst year for home buyers and sellers. Market mortgage rates soared to 17%, breaking the barrier. The situation with lending under the state program is no better. On January 10, large banks announced that they were ready to provide preferential mortgages only for housing projects in which they themselves participate. And they demanded that developers pay them a “commission” of 7-11% for the service. Experts expect a new increase in prices: sellers will definitely pass on the “commission” to buyers.
What a shame when you finally decide to buy your home, save up a down payment, and then bam — the rates have skyrocketed. Instead of joy and excitement before a new stage of life, you have to think about whether you are able to pay all this interest and not be left without a piece of bread and butter. After weighing all the pros and cons, you still decide to take out a loan for an apartment, sacrificing oil. But you get a refusal.
It sounds like a cruel joke, since mortgages were previously available to few Russians. Well, now the number of potential real estate buyers will decrease tens, or even hundreds of times.
— The changes being introduced can significantly affect preferential mortgages. Mainly on its accessibility,” says Alexey Lysenko, commercial director of the federal developer Neometry. — We predict that the changes will affect the cost per square meter, which will include the bank’s costs for issuing a mortgage — this is from 7.5 to 8.9% of the amount of the preferential loan.
Just a year and a half ago it was possible to take out a market mortgage at 8-10% per annum. Gradually, rates began to rise, and now banks, one after another, are announcing an increase in rates on new buildings and secondary housing to 16-17%…
— Mortgages became practically unaffordable for most borrowers after the key rate was raised to 12% last summer. Yes, now rates are rising, but they are already in the barrier zone, so this will not significantly press demand, says Oleg Repchenko, head of the Analytical Center “Real Estate Market Indicators”. — A mortgage at an expensive interest rate on the secondary market can be taken out by people with a high down payment, when they have almost the entire amount to buy a home, but a little is not enough. Or, for example, if a person wants to “close” the deal with money from the sale of another apartment, but a buyer has not yet been found. And, in order not to miss out on the option he likes, he may well take out a mortgage for several months, which he will cover in a short time with money from the sale of his home.
According to the online calculator www.irn.ru, with an apartment cost of 10 million rubles, a down payment of 20% (1.6 million), an interest rate of 8% and a loan term of 20 years, the monthly payment will be 70,261 rubles — 0.7% of the cost of the apartment. Total costs including interest are 18,462,630 rubles (184.6% of the cost of the apartment), and the amount of overpayment is 8,462,630 rubles (84.6% of the cost of the apartment).
With the same introductory fees, but a rate of 17%, the monthly payment will be 123,211 rubles — this is already 1.2% of the cost of the apartment. Total costs including interest — 31,170,692 rubles (311.7% of the cost of the apartment). The amount of overpayment is 21,170,692 rubles (211.7% of the cost of the apartment). Feel the difference…
But when talking about mortgages, mortgage rates and overpayments, we must not forget about the cost of housing. Throughout almost the entire 2022, prices for secondary housing were creeping down and at the end of December 2022, the price per square meter of housing in the “resale” of “old” Moscow dropped to an average of 251 thousand rubles. A one-room apartment with an area of 40 meters could be bought for about 10 million rubles. According to data as of December 10, 2023, a meter of housing on the secondary market costs 270.5 thousand rubles on average, which means that a 40-meter apartment will cost 10.8 million.
By reducing the maximum size of preferential mortgage loans in the capital's agglomerations to six million rubles at the end of last year, the authorities practically curtailed the state program in Moscow, Oleg Repchenko emphasizes. The average price of a one-room apartment within the Moscow Ring Road exceeds 12 million rubles. It turns out that with a minimum payment of 30%, you can only take out a loan at 8% for housing no more expensive than 8.5 million rubles. In “old” Moscow, for that kind of money you can only buy a small studio.
The course towards a gradual winding down of preferential mortgages is maintained. Removing massive rate subsidies will reduce demand. But buyers will benefit from this: sales will fall, which will put pressure on prices, and the number of discounts and promotional offers on the market may increase.
Deputy head of the mortgage department of the federal company Etazhi, Tatyana Reshetnikova, says that during periods of such a significant increase in mortgage rates, housing loans move into the format of micro-mortgages, which, of course, has nothing to do with the state’s obligation to help citizens solve the housing problem:
— Most borrowers, as a rule, use such loans to raise the missing amount in counter transactions to improve housing conditions. We are talking about small missing amounts after the sale of an existing property. There are also those who purchase starter housing, but such borrowers expect to either refinance the issued loan at a lower interest rate within one to three years, or plan to pay off the mortgage early.
“Buyers take out loans, counting on further refinancing after the key rate is reduced,” says Ruslan Syrtsov, managing director of Metrium. — According to the forecasts of the Central Bank, the process of easing monetary policy can be launched at the turn of 2024-2025.
A new trend is the growing popularity of installment plans between the seller and the buyer, without the participation of the bank. Installment plans become relevant when the owner is interested in the urgent sale of his property, but is not ready to make a discount, and does not urgently need to receive part of the funds from the purchase. By the way, such an action is legitimate; it is provided for by law.
Preferential mortgages for regions with high real estate prices are becoming less and less relevant, because with the limit being reduced from 12 to 6 million rubles, the number of apartments for this money on the primary market is greatly limited. First of all, this concerns Moscow, St. Petersburg, the Leningrad region, and the Moscow region, comments Irina Dobrokhotova, managing partner of bnMAP.pro, founder of BEST-Novostroy.
For example, at the end of December in the Northern capital, there were only about 13.5 thousand apartments for sale in new buildings worth up to eight million rubles (taking into account the down payment and the loan size of a maximum of six million), mainly studios and one-room apartments. At the same time, in the Leningrad region there are already 23.1 thousand apartments that will cost no more than eight million rubles — and for this money you can already buy a two- or even three-room apartment. In Moscow, apartments costing up to eight million rubles are less than 5% of the total supply, about two thousand.
However, the housing issue still needs to be resolved, continues Irina Dobrokhotova. As a rule, in such a market situation, buyers begin to consider more budget options, with fewer rooms, a smaller area, in cheaper areas — for example, not in Moscow, but in the region, and this is wrong.
Mortgage? No, we haven't heard. Perhaps this is how apartment buyers and sellers will begin to talk in the near future. Alas, developers are not ready to reduce margins, banks intend to extract maximum profits from home buyers, and the state has withdrawn itself, depriving millions of Russians of the opportunity to solve their housing problem.