A senior executive from Metrium, Ruslan Syrtsov, commented that by the end of 2023 Russia would begin a gradual phaseout of state-supported mortgages at an annual rate of 8 percent. The discussion took place in conversations with socialbites.ca and highlighted shifts in government-backed home loans during that period.
What is a government-backed mortgage?
Since 2018, several state-supported mortgage programs have operated in Russia. These programs typically apply to housing under construction or recently completed homes offered by developers. There are dedicated programs for families, residents of the Far East, rural areas, military personnel, and IT professionals. Some regions also run mortgage schemes to support public sector workers such as doctors and teachers. Family mortgages average around 6 percent, while IT mortgages hover near 5 percent.
The COVID-19 pandemic caused a sharp drop in housing demand in 2020, pushing developers toward financial distress. Later, the government introduced privileged mortgages to stabilize the market. Initially, borrowers could secure a loan at about 6.5 percent per year to buy new apartments. Over time, program terms changed and the rate rose to 8 percent. The required down payment increased from 15 percent to 20 percent in September 2023 and then to 30 percent in December. In December, the maximum state-supported loan for new buildings was standardized at 6 million rubles across all regions, with higher prior limits in Moscow and some surrounding areas.
Authorities not only raised the minimum down payment to 30 percent but also tightened loan caps to 6 million rubles in many cases. That shift left fewer than 300 subsidized apartments in the capital under concessional conditions, prompting experts to advise buyers to consider smaller units like studios or compact one-bedroom apartments if they wished to take advantage of these loans.
Analysts anticipated that pushing the down payment higher would dampen demand for concessional mortgages by roughly 20 to 30 percent in early 2024. This viewpoint came from Valery Tumin, who leads markets in Russia and the CIS at Fam Properties, after a discussion with socialbites.ca.
Data from Domklik indicated that the average price per square meter in Russia’s primary market in November 2023 was about 122,340 rubles. Consequently, a 53-square-meter apartment could be around 6.3 million rubles in the primary market, with an initial payment typically around 2 million rubles on a 6 million ruble loan. Banks had not yet increased the minimum contribution for primary programs, but there was broad expectation that this would change, according to Valery Emelyanov, a stock market expert at BCS World of Investments.
Syrtsov did not rule out the possibility of completely ending privileged mortgages in Russia by the summer of 2024. He noted that targeted programs might remain but could be tightened to conserve the budget. Potential buyers were advised to move quickly to secure family or IT mortgages or explore favorable conditions in the primary market, sometimes including symbolic initial payments for a limited period followed by refinancing options.
Vladislav Antonov, a financial analyst with BitRiver, stressed that the maximum loan amount for a family mortgage remains regional, with up to 12 million rubles in Moscow and surrounding areas, and up to 6 million rubles in other regions. He also warned that relaxations for four regions could be rolled back and suggested that a universal cap would soon be applied nationwide. Buyers were urged to act promptly.
Ready enclosure
Market data from Etazhi indicated that the average price per square meter for secondary-market apartments reached a new record in November, at approximately 119,130 rubles. That means a typical 53-square-meter apartment could be around 6.3 million rubles on the secondary market as well.
Mortgage activity in the secondary market had fallen from about 70 percent to around 10 percent by the end of 2023, according to Syrtsov’s projections. Banks raised rates on completed mortgages in response to increases in the Central Bank’s key rate, which had risen multiple times since July, most recently to 16 percent. By year end, mortgage rates for second homes averaged around 16 to 17 percent annually. Emelyanov noted that some banks had already pushed finished-apartment mortgage rates to 20 percent, with a few cases exceeding 25 percent.
Taking a loan at those high rates proved very burdensome for buyers, according to Syrtsov. In the face of elevated rates in St. Petersburg and other major cities, sellers of second homes were expected to offer discounts of up to 10 percent, a trend observed by Tumin in Moscow and nearby areas.
Experts contended that a complete recovery of the secondary market would require a reduction in the key rate, and consequently mortgage rates, to around 10 to 12 percent. Sovcombank’s chief analyst Mikhail Vasiliev also suggested that the Central Bank might reduce the key rate to 12 percent by the end of 2024.
Should I get a mortgage?
Housing in Russia remains expensive, and many believe prices will fall in the coming years. Emelyanov warned against speculative purchasing, noting that attempts to buy low and sell high may not succeed under current market conditions. The state supports demand by injecting funds into the industry, but buyers who do not have an urgent need should consider waiting until government programs wind down and prices drop enough to allow purchases without subsidies. If a decision is made to buy a new building, buyers should recognize that the real future price could be significantly lower than the developer’s quoted price.
To gauge costs, Emelyanov pointed to prices in the secondary market near similar residential developments. Without accounting for these nuances, buyers might end up paying more over time or facing losses when selling. He concluded that 2024 would be challenging for property acquisitions, with high prices, elevated rates, and barriers to entry. Those with sufficient funds for a down payment might be better off placing that money into the deposit and waiting for a cooling real estate market and normalized mortgage rates.
For a 5 million ruble apartment, a 6 percent family mortgage would require a down payment of about 0.5 to 1 million rubles and monthly payments of roughly 25 to 30 thousand rubles. A similar unit on the secondary market could cost around 4 million rubles, with a down payment of 400 to 800 thousand and monthly payments near 60 thousand rubles. When mortgage rates in the secondary market revert to lower levels, around 10 percent, payments could align with the primary market, roughly 30 thousand rubles per month. Banks often offer refinancing options to convert high-rate loans into more affordable ones, enabling a second mortgage at a lower rate to pay off the existing higher-rate loan.