In a significant development for Russia's housing market, Deputy Prime Minister Marat Khusnullin announced that from January to July 2024, the country saw the completion of 61.5 million square meters of housing, marking a 2% increase compared to the same period in 2023. This growth is part of a broader trend where the construction sector aims to maintain a target of at least 100 million square meters by the end of the year. Khusnullin emphasized that 165 million square meters of multi-apartment housing are currently under construction, a 7% increase from last year, reflecting a robust urban planning potential that has surged by 14% in 2024, reaching 458 million square meters.
Despite this positive outlook in housing supply, the demand for real estate is witnessing a downturn. The issuance of mortgages has declined by 13% year-on-year, with July 2024 seeing almost a 50% drop in mortgage approvals. This shift is largely attributed to the Central Bank's decision to raise the key interest rate to 18%, making loans less accessible and prompting banks to adopt stricter lending criteria. Consequently, the average mortgage rate has climbed to approximately 20%.
The decline in mortgage issuance is also linked to the conclusion of the preferential mortgage program, which had previously allowed citizens to secure loans at an 8% interest rate. This program, initiated during the pandemic in 2020, significantly boosted housing demand but ultimately contributed to soaring housing prices, with costs for new builds increasing from 64,000 rubles per square meter in 2019 to over 171,000 rubles by mid-2024. Experts predict that as demand continues to wane, developers may need to adjust their pricing strategies, potentially leading to a 15-20% decrease in housing prices over the next six months.
- The shifting landscape of Russia's real estate market presents both challenges and opportunities. With the winding down of the preferential mortgage program, housing lending will likely continue to evolve through other subsidized initiatives. However, experts caution that a price correction is imminent as competition among developers intensifies, pushing them to lower prices to attract buyers. The anticipated price drop could provide relief for potential homeowners but may pose financial challenges for developers who have invested heavily in construction projects.
- As the market adjusts, the focus will shift toward understanding how these changes affect various regions differently. While some areas may experience a more pronounced decline in prices, others may retain stability due to ongoing demand fueled by local economic conditions. This dynamic underscores the importance of strategic planning for both buyers and developers in navigating the complexities of the current housing market.
