Advantageous mortgage as driver of affordable housing market development

Advantageous mortgage as driver of affordable housing market development
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In January, Russian President Vladimir Putin instructed the government, Central Bank, and Dom.rf to devise measures for increasing mortgage affordability for citizens and reducing a mortgage rate down to 8%. This could be an effective driver of growth in sales of apartments in the primary market.

In April, the Federal Agency for State Registration, Cadastre, and Cartography (Rosreestr) registered in Moscow 8% of mortgage contracts more than in March. Sure, the most vehement demand for mortgages falls at a standard housing segment, mainly in New Moscow or in the Moscow region. However, recently, there has been an increase in the share of mortgages in both comfort and business-class segments as well.

Our data also suggest the growth in the number of mortgage deals. Over the previous month, their share in our projects has risen by 6% and amounted to 75%, while in some projects, it reached 82-84%. This growth is determined by two key factors: an aggressive interest rate reduction and amendments to the law on shared-equity construction, which are coming into force on July 1.

As for the proportion of funds involved in mortgages, it may change depending on the project. By way of example I may cite the figures for one of the largest-scale complexes in the Moscow region: in the first phase of Prigorod Lesnoye residential compound, the volume of mortgage transactions accounts for 70%, with the share of funds raised for the project through a mortgage amounting to 7.7 billion rubles.

The most popular mortgage among our customers is one with a down payment of 15 - 20% at interest rates of 9.1 - 9.3%. Under these conditions, a comfortable monthly payment amounts to 30,000 - 35,000 rubles.

The next most in-demand one is a two-document mortgage. There is an important condition, though — the down payment must be at least 30 - 50% (depending on the bank). This program accounts for every fifth transaction.

About 10% of all our transactions have accrued to a program with zero down payment. I’d mention that there have been more such requests from buyers this year, but not all of them are approved because for banks, borrowers with a down payment of 0% fit into a high-risk category.

We, in our turn, try to refocus clients on finding at least 10% of the down payment as this significantly affects the interest rate and in the end, allows for buying housing on more favorable terms. For example, Vozrozhdenie Bank offers an interest rate of 12% for a zero-percent down payment and a 9.8-percent rate for a 10-percent down payment. When buying a 27 square-meter apartment for 2 million rubles in Prigorod Lesnoye residential compound, the difference in overpayment will be about 716,000 rubles for 20 years.

Clients realize that legislative changes may entail a rise in property prices, therefore, they do not postpone the purchases and buy housing on mortgage. However, according to my estimates, these legislative changes should not have a significant impact on mortgage products, while their influence on project financing should be expected.

Alyona Antsyshkina, Head of Mortgage Lending Department at Samolyot Group