Yulia Prokhorova: ‘It’s early yet to talk about a fading housing market in Kazan’

Residential property. Market indicators

The housing market started to revive in early September as it was expected. Before 21 September it seemed that the crisis wasn’t as scary as the newsfeed put it. Buyers were encouraged by the news about tightening control of the Central Bank over preferential and subsidised developers, mortgage rates and first instalments after 1 December 2022. But the market stopped dead again after the announcement of partial mobilisation. Or not?

We think that it’s early yet to talk about “fading market.” In terms of the number of deals, 2022 has outperformed 2021 (data for nine months). Though there were the lowest mortgage rates in history of the market in 2020-2021. In the number of deals, this period was anomalous for Kazan’s market. Consumer demand in 2018 and 2018 was heated up by the news about an upcoming rise in prices due to the introduction of escrow accounts.

Perhaps, the total sales volume this year will be in line with that of previous years. As for the forecast for the current period, there is a likelihood of a fall in sales rates to the level of 2017 if prices aren’t corrected. At the same time, the impact of the factor of partial mobilisation and the departure of a part of the population by the start of the next year will change. People will start to gradually come back.

Mortgage

The number of mortgage deals started to grow again in September 2022. This is related to the scheduled imposition of restrictions and control of the Central Bank over developers’ subsidised mortgage.

Extremely low preferential mortgage rates from the developers are achieved by raising the value of a flat for the buyer (borrower) and payout of this difference as part of the fee to compensate for its shortfalls in income to the bank and the use of subsidised rate of the state.

In such a pattern, the flat value goes 20-30% up. In other words, the main burden anyway falls on the client, not just as interest but overcharge for the flat that is seen in a bigger sum of the loan. The Central Bank is convinced that the “preferential” mortgage programme with a subsidy from the developer at extremely low rates — up to 0,01% a year — carries risks for both borrowers and banks and the whole financial system.

Dynamics of the number of co-investment agreements in Tatarstan

Residential property. Tendencies and forecasts

As one of the ways of regulation the Central Bank names the introduction of raised increments for the first instalment by 10-20%, which must influence risky mortgage schemes in the new housing market. Also, there is being considered the possibility of providing “a mortgage from developers” with non-market rates and introduction of macroprudential increments for such loans.

This factor will lead to a growth of demand in the new housing market in October-November 2022. The buyers willing to buy real estate property to pay “by instalments without the down payment” hurried up to seal the deals before 1 December.

Second-hand market

The number of deals in the second-hand market compared to the same period last year reduced by 31%. However, the figures of the number of deals are comparable with the same periods in 2019 and 2020. And the factor of the preferential mortgage launched in 2020 in the new housing market that spurred demand in the second-hand market too is worthy of noting again. So the average number of deals in the second-hand housing market was 9,127 a month, which is 86% above the average indicators. At the same time, the number of signed deals throughout 2021 is higher than the quantity of deals concluded in 2020 by 139%. Now the figures are higher than in the successful 2019: by September 2022, 7,761 deals had been signed, which is almost 50% more than during the same period in 2019.

Dynamics of the number of home deals in the second-hand market in Tatarstan

Prices

Quantitatively, there is no such thing as a fall of the real estate market. And perhaps the buyers expecting a price fall by the end of the year will be disappointed. So the price in the third quarter of 2022 rose again. The growth in the new housing market by July had been 8,8%, in the second market it had reached 4%.

Against the negative news background and cooler demand, as second-hand market sellers thinks, the value of old housing can go back to the prices of January 2022. Since the main appreciation in 2022 was in late February and early March.

As for the housing prices in the new housing market, there are no factors that can influence a decrease in prices in the market.