The Russian new-build market has, in some analysts’ view, developed a dependence on government subsidies, akin to a recurring appetite that keeps growing. Critics argue that state mortgage support inflates prices and makes housing less affordable, suggesting that this approach should be re-evaluated. These conclusions come from specialists at the Indicators of the Real Estate Market analytical center, known as IRN.
IRN observers point out that mortgage subsidies can push up the cost of homes, which contradicts the very aim of the program. For instance, they reference the 2020 introduction of a preferential 6.5 percent mortgage as a case where the policy’s impact was mitigated by rising prices of new homes. The analysis notes that the subsidies proved most relevant last spring, when the Federal Reserve raised its key rate sharply and banks tightened mortgage lending, creating a temporary squeeze in the market.
Today, with the market stabilizing, IRN argues there is less justification for ongoing subsidies. In their view, removing support could actually help cool price growth, bringing closer alignment with supply and demand dynamics. The center suggests that developers should anticipate a price correction in the range of roughly ten to thirty percent, rather than rely on continued policy-driven demand. Such a correction would be a natural adjustment rather than a crisis, according to IRN.
Russia rolled out the preferential mortgage program for new developments in 2020 to assist the housing segment built in the ongoing construction boom. What began as a temporary measure has been prolonged several times and has remained in effect, with the expiration date historically extended and adjusted, including until mid-2024 in earlier iterations. Industry observers have noted shifts in risk profiles tied to these subsidies, especially during periods when broader financial conditions became tighter and long-term government bonds signaled increased risk appetite.
In May, reports highlighted a rise in risk metrics for mortgage lending tied to new-build purchases. Long-term government securities yields climbed, reflecting a tighter credit environment, while there were discussions about broadening the preferential mortgage framework to cover the secondary market. During the same period, lending costs for new-build mortgages increased across major lenders, including large banks and regional institutions, signaling a broader recalibration of credit terms for real estate buyers.
Analysts emphasize that stabilizing macro conditions and a more balanced housing market could reduce the need for subsidies. The debate continues about the optimal policy mix for supporting new-build construction while preserving affordability for households. The overarching message from IRN is that a measured approach, guided by market signals rather than repeated subsidies, would better serve both developers and prospective homeowners. This perspective aligns with a broader view that price corrections, when anticipated and managed, can preserve long-term market health and sustainability.