"There is no bubble in the mortgage market": the head of the analytical center "DOM.RF" Mikhail Goldberg on the situation in the real estate sector

- In the context of the COVID-19 pandemic, the housing construction market turned out to be the most vulnerable, the bulk of which is purchased on mortgages.

Nevertheless, in recent months, the volume of housing loans is confidently hitting last year's records.

What is the reason and how much did the mortgage market grow in October?

- One of the most popular ways to acquire new housing, and especially in a new building, is now a mortgage loan.

Russians buy about 80% of all apartments in buildings under construction on a mortgage.

A year ago, the figure was 56%. 

The growth in the share of mortgage transactions is associated with the implementation of the state support program.

As you know, a preferential mortgage program was launched in April at 6.5%, and a number of banks have already lowered the rate below 6%.

Any citizen can take out a loan at this rate, regardless of marital status, having children, living in a particular region, in contrast to other programs such as "Family Mortgage" and "Far Eastern Mortgage".

Of course, the new program supported the demand for real estate and the mortgage market and will continue to have an effect for some time to come - it has been extended until July 2021.

In October, about 90% of all loans for new buildings were issued on it.

According to DOM.RF and Frank RG, October became a record in the entire history of the Russian mortgage market - 215 thousand loans, which is 80% more than in October 2019.

The total amount of loans reached 545-555 billion rubles, doubling the last year's figure.

These are preliminary data, the final result will be seen in the statistics of the Bank of Russia at the end of this month.

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- What volume of mortgage loans can be achieved in general by the end of 2020?

- According to our estimates, in January-October Russian banks issued more than 1.3 million loans worth 3.2-3.3 trillion rubles.

This is more than in the entire last year, when 1.2 million housing loans were issued for 2.8 trillion rubles.

In total, the growth of mortgage lending compared to the same period last year amounted to 30% in quantitative terms and 45% in monetary terms.

Of course, under these conditions, the mortgage portfolio is growing.

According to the latest data, taking into account securitized mortgage loans (mortgage-backed securities), it amounted to about 9.3 trillion rubles, which is about 8-8.5% of GDP compared to 7.5% a year earlier.

However, in other countries the mortgage portfolio is even larger: in Hungary - 10% of GDP, in Poland - 20%, and in Germany and France - over 40%.

- Is the observed growth of the mortgage market connected exclusively with the launch of the preferential program?

- It is not entirely correct to think that the market is growing only because of the launch of mortgages with state support this spring.

An important role is played by unprecedentedly low rates in the market segment, that is, without taking into account preferential programs.

Now they are about 8%, and a year ago they were 9-9.5%.

This rapid and significant decline in market rates is explained by fundamental economic factors, primarily by the easing of the monetary policy of the Bank of Russia.

The Central Bank's key rate fell by more than two percentage points over the year.

As a result, rates for the entire spectrum of financial instruments decreased: on deposits - by an average of two percentage points per year, on five-year federal loan bonds (OFZ) - by almost one percentage point.

Favorable lending terms allow mortgage borrowers to realize deferred demand, including in the secondary market.

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In addition, the share of refinancing old loans is growing.

In September 2020, 13% of all mortgage loans were issued for these purposes.

For comparison: a year earlier this share was approximately half as much and amounted to 6.3%.

It is profitable to refinance loans right now: the mortgage portfolio is formed at a rate of about 10-11%, and the current refinancing rate is 8%.

This allows you to reduce the monthly loan payment from 25 to 21 thousand rubles.

Thus, the payment burden on citizens is reduced, which favorably affects the stability of the entire financial system.

Favorable lending terms - both for new borrowers and citizens who refinance their existing debt - have led to a noticeable increase in mortgages, including in the market, that is, the unsubsidized segment.

Thus, in the secondary market, the growth in September-October amounted to about 80% YoY.

- In July, Vladimir Putin signed a decree "On the national development goals of the Russian Federation for the period up to 2030".

In particular, the document implies improving the living conditions of at least 5 million families annually and an increase in the volume of housing construction to at least 120 million square meters.

m per year.

How ready are the industries to meet these goals?

- These are ambitious goals, which will require the concentration of all resources of the construction and banking industries.

The development of the housing sector should be carried out on market conditions, only in this case it is possible to guarantee uniform, high-quality market growth - without "distortions", without the formation of risks and threats to the stability of the financial system.

In the conditions of low rates in the economy, healthy competition between participants is coming to the fore, who will have to improve the quality of services, apply the latest technologies and reduce costs.

Achievement of the set targets will require an increase in the issuance of mortgage loans almost twofold, up to 2-2.5 million loans annually.

As a result, the portfolio may grow from about 10 trillion rubles at the end of the current year to 35-40 trillion rubles in 2030.

- As you already noted, the preferential mortgage program is valid until July 2021.

Are there other tools to reduce mortgage rates?

- Yes, there are market-based ways to lower the mortgage rate.

They are largely related to the optimization of banks' costs for issuing mortgage loans.

First of all, we are talking about the transfer of all processes into electronic form, their digitalization.

"DOM.RF" as a development institution in the housing sector is actively developing electronic services in the mortgage market, developing an electronic mortgage.

On the agenda is the further development of digital technologies: electronic user identification and the ability to open accounts without visiting the bank.

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It is also important to attract additional financial resources to the mortgage market for the long term.

This is necessary in order to provide banks with resources for issuing mortgages at market conditions.

For this purpose, "DOM.RF" is actively developing the market for mortgage-backed securities (MBS).

It is necessary to increase the volume of MBS from the current value of 500 billion rubles to more than 10 trillion rubles by 2030.

Today, mortgage bonds account for about 2% of the debt market, and the growth potential is quite high.

We intend to further develop the market, increasing the liquidity of mortgage bonds and their attractiveness for investors.

- Some experts believe that the Russian mortgage market may be threatened by a bubble similar to the American one more than ten years ago.

Do you agree with this opinion?

- There are no prerequisites for, as you say, a bubble in the mortgage market.

The main reason is that banks issue high-quality mortgage loans, and borrowers are conscientious about paying off mortgage debt.

Despite the deteriorating macroeconomic conditions, rising unemployment and falling incomes of the population, the share of overdue debt on mortgages over 90 days is about 1.6%, while on other loans to individuals - about 8.4%.

This is facilitated by the regulation of the Bank of Russia, which closely monitors the quality of the mortgage issued.

The minimum level of the down payment under the subsidy program is 15%.

In addition, the mortgage is issued at a fixed rate.

As a result, borrowers are protected from an increase in loan payments, and they, unlike the situation in the US in 2007-2008, do not risk losing their homes due to rising interest rates.

In addition, let me remind you that the mortgage market in Russia is still quite small and amounts to 8-8.5% of GDP.

For comparison: in the United States, shortly before the crisis, the population's mortgage debt amounted to almost three-quarters of the annual GDP.

- How are housing prices changing in the context of decreasing mortgage rates?

- We see an increase in housing prices, caused, among other things, by an increase in demand from the population as part of the subsidy program.

In October, we presented our first large-scale study on this topic, which we plan to conduct regularly in the future.

Since the beginning of the year, prices for apartments in new buildings have increased by about 10.8%, and during the period of the preferential mortgage program, the price per square meter has grown by 5.9%.

Despite this, the effect of the subsidy program remains positive - the payment for the mortgage borrower, even taking into account the rise in prices, decreased by 10%.

In order for the growth in real estate prices to be moderate and not "eat up" the positive impact of preferential mortgages on the affordability of housing, the supply of housing should increase in proportion to the demand for it.

One of the important measures to support the supply of residential property is the involvement and sale of land for housing purposes.

DOM.RF is actively working in this direction.