The price per square meter and mortgage interest are the two factors that influence the real estate market most, says Artyom Deyev, head of analytics at AMarkets. Obviously enough, rising prices (the value of residential property in large cities almost doubled in 2020–2021) are limiting demand, especially with plummeting incomes (family incomes are expected to cave by at least 10% in 2022 due to accelerating inflation).
In turn, high mortgage rates lead to excessive loan supply, as not many Russians can afford to pay at least 12% interest (which is very different from the previous state program of preferential mortgages at 6.5%). This suggests the real estate market will be under pressure from a low demand. Even if prices continue to grow (driven by the cost of building materials), they won’t rise much (under 15% on average across Russia by yearend), the expert explained to Invest Foresight.
The residential rental market is heavily influenced by labor migration in Russia and has already dipped due to the pandemic and workers transitioning to telecommuting in various industries. This trend continues as companies are struggling to cut costs and sending part of their staff to work remotely, the analyst emphasizes.
“Therefore, rent is expected to decrease (especially in million-plus cities). Furthermore, according to recent research by industry-based resources, renting in Russia has obviously become far more affordable than buying real estate with a home loan. Until recently, the difference between rent and monthly mortgage payments was about 30%; now it is more like 100%-200%. The mortgage market will show a decrease in the cost of housing for rent, and the supply will exceed demand,” Artyom Deyev sums up.