In 2023, the cost of apartments in Russian new buildings increased by no more than 12% on average. Meanwhile, the rate of rise in the price of housing in the secondary market did not exceed 2%. Such preliminary estimates were presented to RT by the National Credit Ratings agency.

Compared to 2022, the growth of real estate prices in Russia has slowed down several times. At the same time, the trend should continue in 2024, experts say.

"The availability of preferential mortgages is decreasing, and the key rate of the Central Bank remains high, so it is unlikely to expect a significant increase in prices: over the year it will be a maximum of 5%. However, it is difficult to say how buyers will behave, since real estate is still one of the few tools that can partially protect savings from inflation," Alexander Divakov, managing director of the NKR, told RT.

A sharp increase in prices is not expected in Fam Properties either. According to experts, in the last months of 2023, there was a cooling in demand in the Russian real estate market, which is likely to be observed in the future.

"In December, the cost of housing in new buildings increased by an average of 1.9%, although a month earlier the growth was about 2.4%. This is not surprising, because the volume of supply on the market is growing, while market mortgages are becoming more expensive, and the terms of preferential mortgages have noticeably tightened," Valery Tumin, director of the Russian and CIS markets at Fam Properties, explained in an interview with RT.

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It should be noted that the cost of housing in Russia began to grow rapidly back in 2020. So, according to the Federal Statistics Service, if at the end of 2019 1 sq. m. in a facility under construction was sold on average in the country for 64.1 thousand rubles, and in the secondary market - for 58.5 thousand rubles, then a year later the figures increased by 23 and 14% - to 79 thousand and 66.7 thousand, respectively.

Subsequently, the sharp growth continued, and at the end of 2021, the values increased to 98.9 thousand and 76.7 thousand rubles (+25 and 15%), and in 2022 they reached 122.3 thousand and 94.4 thousand (+24 and 23%). At the same time, by the beginning of October 2023, prices amounted to 134.1 and 94.5 thousand (+10 and 0.2% since the beginning of the year), according to the latest calculations by Rosstat.

Analysts believe that one of the reasons for such an increase in the cost of square meters is the long-term validity of preferential mortgages. Recall that the program was launched in 2020 to support demand for real estate during the pandemic and was later repeatedly extended. Now, as part of the initiative, all Russians can take a loan until July 1, 2024 to buy an apartment in a new building at 8% per annum, which is half the current market rate.

The launch of the program at one time led to a rush of growth in mortgage lending in the country. So, back in 2019, Russians issued a total of 1.31 million housing loans, but already in 2020 the value increased to 1.78 million, and in 2021 it approached 1.91 million. In 2022, against the backdrop of the start of the NWO and the consequences of Western sanctions, the figure decreased to 1.33 million, but in 2023 it began to grow again and could reach a record 12 million by the end of all 2 months.

Moreover, if in 2020-2021 preferential mortgages and other subsidized programs accounted for only 24% of all loans issued, then in 2022 their share increased to 37%, and in November 2023 it reached 80%. This is evidenced by the materials of the Central Bank and the DOM.RF company.

In general, preferential mortgages turned out to be useful at the first stages, but later led not only to a significant increase in the cost of new buildings, but also to a serious gap in prices in the primary and secondary housing markets. This was previously stated by the Governor of the Bank of Russia Elvira Nabiullina.

"The problem is that developers cannot quickly increase the volume of housing under construction and the explosive growth of mortgages largely goes into rising prices. On average in the country, prices for new buildings have increased by 90% in three years... This is twice as much as the increase in the average salary in the same three years. And if, for example, in 2020, the gap between prices for new buildings and for secondary housing was about 10%, then... Now it's 42%... Broad preferential programs are, of course, very useful as a temporary anti-crisis measure if demand is sharply declining. But in the future, it is advisable to switch to targeted programs," Nabiullina said.

  • © Maksim Konstantinov

As an example, the head of the Central Bank cited a family mortgage at 6% per annum, which is now the second most popular after the preferential one and is designed only for Russians with children. In addition, over the past few years, the government has launched a number of special subsidized programs: for residents of the Far East and the Arctic zone — at 2%, for those living in rural areas — at 3%, as well as for IT specialists — at 5%.

Against the backdrop of the emergence of an increasing number of targeted initiatives, the country's leadership in the second half of 2023 began to gradually tighten the terms of preferential mortgages. In particular, the size of the first installment for obtaining a loan was increased from 15 to 30% of the cost of housing. At the same time, the maximum loan amount has become uniform in all regions and is now 6 million rubles, although previously in the Moscow and St. Petersburg agglomerations the limit reached 12 million.

Stricter terms of preferential mortgages are designed to help weed out unreliable borrowers and reduce the volume of subsidized loans. This, in turn, will make it possible to avoid even greater overheating in the housing lending market, Valery Tumin is sure.

"An increase in the down payment and a limitation of the maximum amount of issuance will cut off up to a third of demand, and developers in a highly competitive environment will not only have to move away from regular price indexation, but also more actively start offering a discount. In general, for the current year, at least for the first quarter, I predict a certain cooling of the real estate market, and not only in the primary sector, but also in the secondary sector," the RT interlocutor said.

In his opinion, the pressure on the cost of finished apartments will be exerted by the tight monetary policy of the Central Bank. Recall that starting in July 2023, the regulator began to raise the key rate sharply to combat inflation and has already raised it five times over the past time - from 7.5% to 16% per annum. As a result, the average market interest rate on mortgages in the country increased from 11% to 16%. At the same time, since preferential programs practically do not apply to the purchase of secondary housing, demand in this segment will decrease in the foreseeable future.

"Prohibitively high rates and cooling demand will contribute to the fact that in Moscow, St. Petersburg and, possibly, a number of other large cities, secondary housing will fall in price by up to 10%. In the segment of new buildings, the price dynamics will depend on the decisions of the authorities. If preferential mortgages are not extended after July 1, demand will continue to weaken, and the cost difference between primary and secondary housing will be significantly reduced. Then the market will come to equilibrium, and the overall price growth will slow down to an average of 5-7% per year," Valery Tumin added.

A similar point of view was expressed by the vice-president of the Russian Guild of Realtors Oleg Samoilov. The expert also predicts a cooling of demand, but at the same time does not rule out the possibility of even a slight decrease in prices for apartments in new buildings in the second half of 2024.

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  • © Alexander Sukhov

"In the context of tightening conditions for preferential mortgages and a decrease in demand, it is possible to reduce the cost of real estate by about 10-15% in six months. However, prices are unlikely to fall below because, unlike end consumers, banks and construction companies are not interested in this," Samoilov said in an interview with RT.

At the same time, Irina Radchenko, Vice President of the International Academy of Mortgage and Real Estate, does not expect a serious decline in housing prices in the new year. In her opinion, this will be partially hindered by the continuing investment demand.

"Since inflation still remains at a relatively high level, and the exchange rate of the national currency is also not insured against a decline, Russians will continue to direct their savings to square meters, if possible. Therefore, there will be no sharp drop in real estate prices. Rather, we will see them consolidate at current levels, unless there is a new weakening of the ruble," the RT interlocutor concluded.