Analyst Repchenko: “Astronomically high housing prices make apartments unaffordable for buyers”
Savings and loan banks can become an alternative to mortgages in Russia. A bill on them has already been prepared; it needs to be quickly adopted and put into practice. This was stated by Marat Khusnullin, approved by the State Duma for the post of Deputy Prime Minister of the Russian Federation. What is this new mechanism for accumulating money per square meter and is it capable of solving the housing problems of Russians?
Photo: AGN «Moscow»
Today, a square meter of new housing is expensive, and interest rates on housing loans are high, with the exception of a number of preferential programs, most of which the authorities want to complete this summer. “At the moment, the key rate of the Central Bank is 16% and, judging by the comments, its reduction can only be expected in the second half of 2024,” recalls Vadim Butin, an expert at the Glavstroy-Nedvizhimost company. “Taking into account the winding down of the preferential mortgage program from July 1 and the possible modernization of the family mortgage program, there is a possibility that part of the population will not be able to purchase an apartment on credit in the near future, and therefore the government has developed a savings and loan mechanism.”
A decrease in mortgage lending could have a bad impact on construction, traditionally considered the engine of economic development, so high officials are trying to come up with new ways to support the housing market. “Now we are looking at the mechanisms of savings and loan banks, we are looking at how to legally and at the legislative level make it possible to sell housing in installments,” said Deputy Prime Minister Khusnullin.
A savings and loan bank is a financial mechanism that combines elements of a long-term deposit and a loan, allowing you to purchase an apartment faster than if you had to save the entire amount of its cost. The bottom line is this: a Russian who wants to purchase a home must open a special account into which he undertakes to regularly deposit money. The savings and loan will charge interest on these funds. In this respect, this financial instrument is similar to a deposit. But as soon as a certain amount has accumulated there, say, 50% of the cost of the chosen housing, the owner of this account can already buy an apartment, and the savings and loan office will loan him the remaining amount at a reduced interest rate. In this way, a savings and loan is similar to a loan.
“The client can purchase an apartment without a down payment, which can open up new opportunities for consumers,” explains Alexey Novikov, director of the mortgage lending department at Est-a-Tet. However, for such a complex mechanism to work, legislative development and government support are necessary, but this is not yet available. It is interesting that discussions about the creation of savings and loan banks have been going on for more than 20 years. The first time the draft federal law “On Construction Savings Banks” was submitted to the State Duma back in 2002. He was rejected six times. The last time is in 2021. However, the approaching abolition of preferential mortgage programs in the real estate market has opened up new prospects for this initiative. According to Khusnullin, deputies have already prepared two relevant bills. He confirmed his readiness to participate in their further development and unification into a single document. “The bill must be introduced and put into effect as quickly as possible,” he emphasized.
What needs to be worked out? The mechanism for accumulating funds for the purchase of housing should guarantee higher interest rates in the savings part and lower interest rates in the credit part. According to Butin, savings and loans should have, first, an increased rate or option that insures future home buyers against inflation; secondly, a reduced mortgage rate for the investor.
At the same time, the expert is confident that the banks themselves or other financial institutions will most likely agree to the creation of such cash desks, since deposits imply raising funds on a long-term basis.
But a number of experts also have doubts about the performance of the proposed mechanism. “The main problem of the housing market today is not the lack of mortgages or its alternatives, but astronomically high prices that make apartments unaffordable for buyers even with zero mortgage rates,” says Oleg Repchenko, head of the Real Estate Market Indicators Analytical Center. — Apartments in major cities of the country have approximately doubled in price over the past 3-4 years, outpacing inflation and interest on deposits. When prices are rising at such a rate, a person will be able to save up for an apartment using any special savings deposits only if the rates on them are significantly higher than on regular ones. Not by 1% or 2%, but by an order of magnitude. As far as I understand, there are no ways to ensure such rates in the bill.”
In this regard, according to the expert, today it is more important to work on the cost of construction, which will be reduced by de-bureaucratization, the abolition of unnecessary approvals, the elimination of administrative barriers, simplifying access to land plots… It is necessary to invest money in the construction of social and transport infrastructure. All these measures will lead to an increase in construction volumes, competition among developers will increase, which will push prices down, and the affordability of housing will increase, the analyst emphasized.