Rates will rise
Currently, there are seven federal preferential programs in Russia that allow people to purchase housing on credit at a low rate. However, as of July 1, there will be six of them left: preferential mortgages, the most widespread, will be terminated. Family mortgages have been extended until 2030, but from 2025, they will most likely operate under new conditions. The fate of IT mortgages is in question: the authorities may partially abandon them. The remaining four programs — rural, Far Eastern and Arctic, military, and mortgages for new regions — will remain unchanged for now. MK found out from experts how the end and transformation of mass housing loan programs will affect the real estate market.
The preferential mortgage program for new buildings was launched in the spring of 2020 as an anti-crisis measure against the backdrop of the coronavirus pandemic, which led to a decline in economic activity. It existed for four years, but the conditions for it changed. Initially, the rate for this type of state support was 6.5%, then 7%, and from January 1, 2024 — 8%. The down payment also changed. Initially it was 20%, when the program was extended until July 1, 2021, it dropped to 15%. Then, from September 20, 2023, the minimum down payment was increased from 15% to 20%, and from January 1 of this year — to 30%.
If for the first two years the government supported the program and were satisfied with the volume of its implementation, then it became the cause of numerous disputes among the “powers of this world.” Representatives of the construction industry emphasized that thanks to the program, buyers of new buildings could take out a loan at a low rate, and the country's economy received an incentive to develop. The Central Bank pointed to disproportions in the cost of housing between the primary and secondary markets, which have become especially noticeable in the last two years. As a result, the affordability of housing decreased, and Russians buying apartments in housing under construction on credit greatly overpaid for square meters. The Ministry of Finance supported the position of the Central Bank of the Russian Federation, pointing out that by September 2023 (when there was widespread discussion of this form of state support), 60% of the mortgage market accounted for subsidized programs, and in the primary housing market the figure reached 90%. According to official data, since the launch of preferential mortgages, a total of 1.49 million loans worth 5.77 trillion rubles have been issued. The top 5 leading regions in terms of the volume of issuance of preferential mortgages included Moscow, Moscow region, St. Petersburg, Krasnodar Territory and Tyumen Region.
Against the backdrop of government announcements about the winding down of the preferential mortgage program, interest in it among Russians has increased noticeably. According to the real estate agency Etazhi, demand for this program increased by 44% in May, and by another 24% in June.
The family mortgage program was launched in 2018. According to the government's plan, it was supposed to end on July 1, 2024, but this winter President Putin announced that it would be extended until 2030. True, the government has stated several times that the conditions for issuing family mortgages may change. Now family mortgages are issued at 6% per annum for the purchase of an apartment in a new building, a house with a plot, as well as for its construction. Under the same program, it is possible to purchase “secondary” goods in rural settlements in the Far Eastern Federal District (FEFD). Down payment — 20%; The maximum loan amount is RUB 12 million. in Moscow, St. Petersburg, Moscow and Leningrad regions, 6 million rubles. — in other regions. How exactly this program will change is still being discussed in the “high offices.” According to one of the initiatives, a family mortgage with a rate of 6% will be available only for families with children under 6 years old, and for others the rate will be twice as high — 12%. According to another proposal, the rate will be increased for all families with children, but it will be possible to buy apartments not only in new buildings, but also on the secondary market. According to Vladimir Putin in February, with the help of this program the living conditions of 900 thousand Russian families have already been improved.
IT mortgage was launched in May 2022 to support high-tech specialists and create an additional incentive for IT specialists to work in Russia. It is scheduled to end on December 31 of this year. Workers aged 18 to 55 from the list of companies approved by the government have the opportunity to take out a housing loan at 5% to purchase an apartment, townhouse, house on the primary market, as well as for its construction. The down payment is 20%. The maximum loan amount is 18 million rubles in regions with a population of over one million, 9 million rubles in other regions. At the same time, workers must receive a salary of 150 thousand rubles in Moscow, 120 thousand rubles in cities with a population of over one million, and 70 thousand rubles in other regions. According to the Ministry of Digital Development, in the year and a half of this program, Russians have taken out 38.5 thousand loans for 337 billion rubles.
There were no direct statements from the government about the need to curtail this program. However, the director of the Department of Financial Policy of the Ministry of Finance, Alexey Yakovlev, said that his department advocates the planned completion of all preferential mortgage programs, except for family ones. From these words it follows that the authorities may also refuse IT mortgages. At the same time, earlier Deputy Prime Minister of the Russian Federation Dmitry Grigorenko instructed the Ministry of Finance and the Ministry of Digital Development to work on the issue of extending this preferential program. The latest news is that Moscow and St. Petersburg may be excluded from IT mortgages, but this issue is still being discussed.
It is already clear that the transformations coming from July 1 will definitely affect the most widespread areas of state support — preferential and seed mortgages. But how exactly? The experts interviewed by MK expect serious changes, but did not come to a common conclusion about how these government decisions will affect the real estate market.
“Without artificial support for demand, sales on the primary market will decrease: people will not be able to buy abnormally expensive apartments with a market mortgage at 18-20% per annum. And decreased sales will put pressure on prices. But since there is no talk of a catastrophic drop in demand—targeted preferential government programs remain on the primary market—there is also no need to expect a noticeable price revision. Most likely, the size of the discount will increase. And, of course, in order not to go downhill, developers will offer buyers alternative ways to buy apartments with a mortgage.”
“From my point of view, the abolition of preferential mortgages for new buildings from July 1 is a positive step for the market. It will ultimately make housing more affordable for those categories of citizens who do not belong to preferential categories. The demand for new buildings will decrease, and as a result, sales volume will decrease. Prices will inevitably go down. As a result, there will be a difficult situation for developers and the banks that lend to these developers. However, this may encourage them to launch some of their own promotions or special programs, for example, installment plans beneficial for the buyer or subsidizing mortgage rates by developers.»
Alexey Novikov, Director of the Mortgage Lending Department of Est-a- Tet:
“As for apartment prices, they will not go down, that’s for sure. And all speculation that the market will go into a discount is amateurish reasoning or a deliberate falsehood. To understand this, it is enough to analyze the dynamics of the cost of building materials, maintenance of construction equipment, as well as the loan rate for project financing of construction. There is a banking model of project financing, which will also not allow prices per square meter to go down. Therefore, in July the market should expect some cooling in demand until mortgage purchase instruments are clear, as well as what will happen next with the key rate. You need to understand that with the expiration of preferential products, clients will have to take out a mortgage at the market rate, which averages 18.5%. These are high payments and a heavy debt load for people.”
“In my opinion, prices on the primary real estate market today are unreasonably high. I believe that by the end of the year they will be adjusted downward by 15-20%, so it makes sense to wait for offers that are more profitable in terms of cost per square meter and purchase housing then.”
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“For those for whom it is important to solve the housing problem here and now, and do not have time to wait, it is better to do so. Yes, apartments are expensive today. But it’s better to buy an expensive apartment now at 8% than in two weeks at 20%. Of course, after the abolition of mass subsidies, there will be a downward adjustment in prices, but a rapid revision of the cost of square meters will not happen.”
“The advice is obvious: if you are serious about purchasing real estate, then hurry up. Take advantage of the moment while a profitable mortgage product is still available, if, of course, you meet the necessary conditions. And if you have found a good apartment with a reasonable price, but do not qualify for preferential mortgage programs, then do not be afraid to use market lending programs. So that later, when the key rate goes down — and it will obviously go down — you can absolutely calmly refinance this mortgage. Moreover, in large reliable agencies this service is provided to clients free of charge.
Taking into account the likely and incomprehensible changes in the Family Mortgage program — and this could be an increase in rates or down payment — we advise those who falls under the terms of this program and take out a loan in June at a favorable rate of 6%.”
“If you did not have time to submit documents for a preferential mortgage before this time, then there is no need to rush. Firstly, there is very little time, it won’t even be possible to “run into the last car.” Secondly, a significant number of banks have already chosen limits under this program. Thirdly, in my opinion, prices on the primary real estate market today are unreasonably high.
In the current situation, those buyers of new buildings who have already received approval for loans from banks, and Russians who have the right to participate in targeted mortgage programs for family mortgages, until the conditions have changed, should hurry up. If they already have approved loan approvals, then it is logical to reach a deal in the remaining week, receiving an additional discount from developers who are now fighting for every buyer and are ready to accept significant discounts.
Under the Far Eastern and Arctic mortgage programs, the conditions do not change, so there is no point in rushing for those who apply for these types of support. IT mortgages have been suspended in most banks, as limits have also been set for them. Conditions under this program are likely to worsen, so if a citizen has something agreed upon with the bank regarding it, then it is better to act.
The market has very different expectations for how family mortgages will transform next. There is an option in which mortgages for families with children will become more accessible: citizens will have the right to purchase real estate on the secondary market. Maybe the percentage will be a little higher, but you will be able to buy ready-made housing, which you can move into immediately. And before that, there was a family mortgage program for new buildings, where families in need had to wait several years for housing, and it was sold at an inflated price.»
“ I advise Russians, until the market has stabilized and the cost of market mortgages has decreased, to rent housing. Renting costs 4-5% per annum of the property value. And if you buy a home today with a mortgage at market prices, then the costs will be 18-20% of the value of the property annually. In my opinion, it is 3-4 times more economically profitable to rent housing and this is the most reasonable behavior for the current state of the market. And then, when the key rate adjusts and the mortgage market becomes more accessible, it makes sense to return to mortgages. In addition, after July 1, you need to carefully look at what developers will do after the cancellation of preferential mortgages. They can offer new products, including good installment plans or subsidized mortgage rates, which can affect the market as a whole.”