Stagnation after growth: housing prices started declining in Russia

Ivan Zubov

The decline in household incomes and demand in the housing market leads to price stagnation, according to the review of the financial stability of the Bank of Russia.

In the first quarter of this year, there was an increase in demand for housing, and therefore prices grew, the citizens of the country invested in real estate, protecting their assets during the crisis period, experts say.

According to Rosstat, the cost of 1 sq. m in new buildings in the first quarter increased from 105.7 to 108 thousand rubles, and in the secondary market - from 104.7 to 106.5 thousand. But tomorrow the situation may change, the authors of the review believe: "In the long term, prices in the housing market are likely to stagnate due to a decrease in consumer demand against the backdrop of rising mortgage rates and a reduction in real incomes".

In addition, the Bank of Russia publishes data on mortgage lending in April this year. Mortgage issuance decreased very significantly: the total number of loans fell by 74.2%, and the total amount - by 70.7%.

“We did not observe such a collapse either during the covid crisis or during the 2014/15 crisis”, - experts from the analytical channel MMI write. - Judging by the fact that the average rate on loans issued fell in April from 8.05 to 7.64%, the issuance of loans on market terms ceased altogether, and people took only loans under the government's preferential programs..."

However, in May, interest rates on loans began to decline, and, most likely, the issuance of mortgages on market conditions will again become more active. Under these conditions, experts do not expect a catastrophe in the segment of residential real estate and mortgages, since there is still money in the budget, and therefore the government will definitely support this important sector. However, when budgetary resources begin to dry up, the situation in the housing market in many regions of the country will worsen again”.

At the same time, in April, the mortgage debt of Russians for the first time since January 2017 decreased: loans were issued less than repaid.

Channel experts are confident that the mortgage market should let off steam, as its annual growth of 30% made a strange impression.

“We expect that the growth of the mortgage portfolio has resumed since May, but at a more moderate pace - 0.5-1% per month. A slowdown in mortgage growth will cool the housing market prices. However, in Moscow, in Sochi, in a number of other cities, the decline in housing prices has already begun...”, - the experts conclude.