The abolition of subsidies in mortgage rates could potentially decrease demand up to 50% for new buildings in Moscow and Moscow region, but to say that the development of the market of mortgage lending will stop, wrong.
MOSCOW, 19 Jan. The refusal to extend the program to subsidize mortgage rates may result in decrease demand up to 50% for new buildings in the Moscow region, said the real estate market experts interviewed.
The collapse of demand
Director of sales Department GK “Granel” Rustam Arslanov believes that the refusal of renewal of government subsidies in mortgage rates would have a significant impact on the primary housing market. According to him, the share of mortgages in the structure of sales from developers varies from 50 to 80%.
However, to say that the development of the market of mortgage lending will stop, it would be wrong, the expert continues.
“Now, pending the completion of this program home buyers are starting to massively take out a mortgage. In the spring, the time when everyone will get a mortgage, we will receive a sales decline. How deep will the market fall, will depend on the General economic situation in the country. Insecurity, reduced incomes and other factors do not add optimism,” says Arslanov.
If we talk about the other leverage, which may be an alternative to the state program, there are additional tools offered by the developers, it is unlikely that they will have a significant effect, says Arslanov. Payment of interest and flexible installment plans are valid up to a maximum of two years, more builders are not capable of. “The completion of the program will undoubtedly have an impact on sales – it is possible to predict a reduction of 50%,” emphasizes Arslanov.
According to the head of the mortgage centre Est-a-Tet Alexey Novikov, in the first month after the cancellation of this program, home sales could fall by 40%. In the following months the decline in sales can be as high as 20%.
“All the hope that the banks may develop their own programs to support mortgage demand. They wave can provide mortgages at 13-13,5%. In this case, the drop in sales will not be as deep,” adds Novikov.
At the same time, the Director for public relations GK “MITS” Olga Novitskaya considers that the sharp drop in demand after the termination of the program to subsidize mortgage rates is unlikely to happen.
“Builders will have to work in conditions more difficult and to adapt to new realities. But I don’t think that will happen a sharp drop in demand. The demand for housing in the Moscow region remains, there are people who continue to invest in real estate. During 2015, the market used to living in difficult conditions,” explained Nowitzki.
It indicates that participants in the markets were betting that mortgage program will be extended, because it remains the main driver of demand. “Although the economic situation is unstable, this program was support for a population that couldn’t buy a home without borrowing. This year has just begun, it is difficult to say, how will the events develop in the economy in the near future, but if the program is not renewed, it is unlikely that demand will be stable and sustainable,” says nowicka.
Build will be smaller
In the CC “Granel” is expected to reduce the volume of construction in 2016 if the program to support mortgage lending is not renewed.
“The completion of the program will affect the volume of sales. This means that developers with a large credit load may be on the verge of bankruptcy. In this regard, one can expect reduction of volumes of housing construction”, — predicts Arslanov.
Agree with him and Novitskaya. “There is a possibility that can occur a slowdown in construction. The projects that are being implemented now, will be completed. But the timing of construction of new projects, recently released on the market, may be adjusted. In any case, the developers will respond to market conditions”, — said the expert.
The head of the mortgage center of FGC “Leader” Pavel Tymoshenko expects that after the termination of the program of state support, while maintaining the current value of the key rate of the Central Bank, the programs of leading banks on the mortgage will be fixed at the level of 13.5-14.5% per annum instead of the current rate of 11.5-12%. This increase in rates will increase the monthly annuity payment in the mass housing segment is about 4-5 thousand rubles a month.
“On the one hand, the amount is not large, but for many of our clients, this is critical, since the approval of the loan and the amount of the income must be above 10 thousand rubles. To avoid losing this customer category, developers will be forced to subsidize bet the Bank on their part. But since the margin of builders now so close to the minimum, and prices to cost, this subsidy will only be possible by increasing the cost per square meter”, — says Tymoshenko.
Thus, in his view, the proposal in 2016 will only grow, as many major developers have already announced the launch of a very impressive project, to realize that without affordable mortgages will be extremely difficult.
Tymoshenko predicts that in 2016 the market can leave many construction companies. “If the Finance Ministry will go the way of subsidy of project financing for developers, this will further aggravate the situation of medium-sized players with small portfolios of sites. Banks are reluctant to Finance developers with a little experience, since the risk of loan default is very high,” he said.