State support props up real estate market
The plenary session entitled 'Development without fear: what will support the market?', which took place as part of the International Real Estate Investment Forum PROESTATE.Live, was dedicated to the state support measures for the real estate market. A resounding theme running through the discussion was the crucial importance of keeping government measures in place, at least for a while. The Forum is being organized by the Roscongress Foundation; the Ministry of Construction, Housing and Utilities of the Russian Federation; the Academy of Real Estate (ARE), and IMMERGITY.
10.09.2020
It has long been clear that the most effective support measure for the residential construction market is mortgage lending, while the best way of promoting mortgages is to reduce their interest rates.
As suggested by Vladimir Yakushev, Minister of Construction, Housing and Utilities of the Russian Federation, the key measures of state support of subsidising loan interest rates for property developers and subsidising mortgage interest rates have had a positive effect. Subsidising loan interest rates, said Yakushev, was introduced in 2015 after the sanctions against Russia came into effect, and with the arrival of new misfortunes the government decided to replicate a tried and tested solution. Subsidising the mortgage interest rates has helped to stimulate demand, which had started to fall with the onset of the pandemic. Both property developers and buyers, says Yakushev, agree that the measures have been effective.
Now, he says, there's talk as to whether to continue the programme, which is set to run until 1 November. The Ministry believes that the programme has had positive results but a decision will be taken on a government level.
According to data from the Agency for Residential Mortgage Lending in Russia, more than 80% of mortgages for new builds is issued as part of preferential programmes. This, together with a reduction in general interest rates, has led to a decrease in mortgage rates of 3% against the previous year and an increase in the number of mortgages issued. "July saw record levels of mortgages in Russia: 46,000 loans were issued, and that's 50% more than last year. It looks like August will beat that record," said Artem Fedorko, Deputy Deputy CEO of DOM.RF.
"The state support is having a noticeable impact. The preferential mortgage [programme] has boosted demand and has meant that the proportion of mortgage deals has gone from 60% to 90%," said Elvira Galyautdinova, Commercial Director of real estate development company #Suvarstroit; General Director of Suvar Real Estate in Tatarstan; a business coach.
The other state support measure of subsidising loans for real estate developers has also proved effective. Thanks to the programme, banks have received over RUB 1 billion in support for construction projects. Applications have been received from over 170 developers in 39 regions across Russia, while several projects have already received funding.
According to Mr. Fedorko, it is these two measures which have propped up the market. The next step is for the government to offer support for private housing projects, which are estimated to take up 40 million square metres of a total market share of 100 million square metres. According to forecasts, the market will reach 105 million square metres by next year and the share of private housing projects is set to increase, too. As a result, Russia's Ministry of Construction is working with the government to develop measures to support private housing.
According to Vladimir Yakushev, integrated urban development projects will also benefit from the support, with the aim of creating pleasant residential areas. "This is a trend which is here to stay. Russians want to live in a nice area," said the Minister.
Urban planning is a new trend which has taken off in the Russian real estate market and in Chisinau, too, according to Ion Ceban, Mayor of Chisinau in Moldova. He believes that until now, Chișinău had never had a modern masterplan but a Soviet-era document. Now, though, with the help of partners from Romania, France, and Russia, a plan is being devised for wide-scale development, and urban planning is establishing itself as a key trend.
According to Vladimir Yakushev, integrated urban development and proper town planning are giving impetus to the construction market. And it's not just a case of developing new types of accommodation but "seriously working on transport infrastructure". He went on to stress that "not all cities today can boast good transport accessibility, which is essential to a decent quality of life in any local area."
PROESTATE.Live partners: Official Partner – Mosinzhproekt; Partners – ANT Development and YugStroyImperial; Official Session Partners – A101 and Colliers International Group Inc.; Session Partner – Cushman & Wakefield.
Official website of the event: proestate.ru/en
As suggested by Vladimir Yakushev, Minister of Construction, Housing and Utilities of the Russian Federation, the key measures of state support of subsidising loan interest rates for property developers and subsidising mortgage interest rates have had a positive effect. Subsidising loan interest rates, said Yakushev, was introduced in 2015 after the sanctions against Russia came into effect, and with the arrival of new misfortunes the government decided to replicate a tried and tested solution. Subsidising the mortgage interest rates has helped to stimulate demand, which had started to fall with the onset of the pandemic. Both property developers and buyers, says Yakushev, agree that the measures have been effective.
Now, he says, there's talk as to whether to continue the programme, which is set to run until 1 November. The Ministry believes that the programme has had positive results but a decision will be taken on a government level.
According to data from the Agency for Residential Mortgage Lending in Russia, more than 80% of mortgages for new builds is issued as part of preferential programmes. This, together with a reduction in general interest rates, has led to a decrease in mortgage rates of 3% against the previous year and an increase in the number of mortgages issued. "July saw record levels of mortgages in Russia: 46,000 loans were issued, and that's 50% more than last year. It looks like August will beat that record," said Artem Fedorko, Deputy Deputy CEO of DOM.RF.
"The state support is having a noticeable impact. The preferential mortgage [programme] has boosted demand and has meant that the proportion of mortgage deals has gone from 60% to 90%," said Elvira Galyautdinova, Commercial Director of real estate development company #Suvarstroit; General Director of Suvar Real Estate in Tatarstan; a business coach.
The other state support measure of subsidising loans for real estate developers has also proved effective. Thanks to the programme, banks have received over RUB 1 billion in support for construction projects. Applications have been received from over 170 developers in 39 regions across Russia, while several projects have already received funding.
According to Mr. Fedorko, it is these two measures which have propped up the market. The next step is for the government to offer support for private housing projects, which are estimated to take up 40 million square metres of a total market share of 100 million square metres. According to forecasts, the market will reach 105 million square metres by next year and the share of private housing projects is set to increase, too. As a result, Russia's Ministry of Construction is working with the government to develop measures to support private housing.
According to Vladimir Yakushev, integrated urban development projects will also benefit from the support, with the aim of creating pleasant residential areas. "This is a trend which is here to stay. Russians want to live in a nice area," said the Minister.
Urban planning is a new trend which has taken off in the Russian real estate market and in Chisinau, too, according to Ion Ceban, Mayor of Chisinau in Moldova. He believes that until now, Chișinău had never had a modern masterplan but a Soviet-era document. Now, though, with the help of partners from Romania, France, and Russia, a plan is being devised for wide-scale development, and urban planning is establishing itself as a key trend.
According to Vladimir Yakushev, integrated urban development and proper town planning are giving impetus to the construction market. And it's not just a case of developing new types of accommodation but "seriously working on transport infrastructure". He went on to stress that "not all cities today can boast good transport accessibility, which is essential to a decent quality of life in any local area."
PROESTATE.Live partners: Official Partner – Mosinzhproekt; Partners – ANT Development and YugStroyImperial; Official Session Partners – A101 and Colliers International Group Inc.; Session Partner – Cushman & Wakefield.
Official website of the event: proestate.ru/en