What to expect from the residential real estate market in 2024?

What to expect from the residential real estate market in 2024?
Based on the results of January–October, Rosreestr in Moscow registered 91,589 equity participation agreements in the primary market and 144,695 transfers of rights in the secondary market, which was a record result for ten months in the entire history of observations.
The highest demand occurred at the end of summer - beginning of autumn: in July, the Central Bank raised the key rate for the first time since February 2022, buyers tried to get a loan in time while previously approved applications for mortgages at the “old” rates were valid.
“In the primary market, the catalyst for demand was also an increase in the down payment to 20% and an increase in the minimum rates for preferential mortgage programs. Demand was also fueled by the anticipation of the introduction of prohibitive surcharges to risk coefficients from October 1 for mortgages with a low down payment and for heavily over-leveraged borrowers, which are distributed and for a preferential mortgage,” experts say.
The growth rate for mortgages hit a record 10.8% in the third quarter of 2023 (the previous high over the past five years was 8.7% in the 4th quarter of 2020), according to the Central Bank. At the same time, the share of mortgage borrowers with a high debt burden reached 47%, of course, a record, and this figure is “steadily growing.”
The Central Bank's restrictive measures are aimed at cooling the market.
But the results of these measures will most likely be noticeable in the new year. In the meantime, mortgage issuances against the backdrop of the rush are breaking records and are already 30% higher than the results of the same period in 2022. At the same time, the increase in the number of loans issued is much less significant, analysts note.
“Of course, 2023 will be remembered and will go down in the chronicles,” experts say. “The market not only reached records, but did it despite all external factors, it would seem: an increase in the down payment, an increase in mortgage rates, a high price per square meter. m".
The volume of housing commissioning by the end of 2023 will also be a record compared to the past and will exceed 50 million square meters. So far, according to the latest expert data, in January – November 2023, 41 million square meters were commissioned in Russia. m of multi-apartment housing.
Reality of 2024: the market will cool down
Experts are confident that the housing market will cool down in the new year. In the first quarter of 2024, demand will freeze for some time, or at least decrease significantly. The reasons for this are: seasonality (January is a period of low number of transactions, but, as a rule, January transactions are won back in December) and an increased key rate.
And in 2024, according to experts’ expectations, the market will experience stagnation: in the next 1.5-2 years, prices on average in the market will remain +/- at the same level. At least on the primary market.
In the secondary market, according to experts, demand will inevitably sag against the backdrop of protective mortgage rates and the cost of housing will go down.
“In the secondary market, where mortgage rates start from 15.6-16.4% (the conference was held before the key rate was raised to 16% - editor’s note) in the largest state banks, in the coming year apartments may become cheaper by 10% and more. But in the first months of the new year, you should not expect a price revision - in order to realize the change in market conditions, private sellers, as a rule, need several months,” analysts warned.
The dynamics of prices in the primary market, according to him, will primarily depend on preferential mortgage programs, the fate of which has not yet been decided.
Absolut Bank is preparing for a reduction in demand for mortgages against the backdrop of high rates and a revision of requirements for state programs in the first half of 2024.
“In the second half of the year, the situation may change if the regulator moves to easing monetary policy. Reducing the mortgage rate to at least 12% will revive the secondary market. Prices on the primary market most likely will not rise, at least not at such a rapid pace as in 2023.
Prices per square meter on the secondary market will gradually “catch up” to the cost of new buildings (today apartments on the primary market in Moscow cost up to 30% more than similar ones on the secondary market - editor's note). When the conditions for programs for the primary and secondary markets are leveled out and parity is achieved in the number of transactions, then the prices will be approximately the same. This could already happen by the end of 2024, analysts predict.
Preferential mortgage: “news about the reduction of preferential programs is no longer news”
Another important event of the outgoing year is the gradual winding down of the state program of preferential mortgages. In the fall of 2023, the down payment amount for all state programs was increased to 20%, and on December 15, preferential mortgages were “cut” even more significantly. Now the first payment has been increased to 30%, and the maximum amount of a preferential loan for all regions, including capital cities, is 6 million rubles. The Ministry of Finance noted that this measure is aimed at improving the quality of loans.
“In itself, increasing the down payment even to 30% will not collapse demand. But in combination with other factors (an increase in minimum rates, the introduction of prohibitive surcharges on risk coefficients for mortgages with a low down payment and for heavily over-leveraged borrowers, etc.) will put pressure on effective demand,” experts say.
Market mortgage: from 15% and above, and this is for now
Rates on market, that is, unsubsidized loans, depend on the key one. So far, the regulator’s rhetoric is such that a high key rate will last for a long time and next year will average 12.5-14.5%. Based on this, then, most likely, market mortgage rates in the coming year will remain approximately at the current level, experts say.
Banks have not yet responded to the latest increase in the key rate on December 15 to 16%. So far, the minimum mortgage rates for large banks start at 15.6-16.4% per annum. For example, in Sberbank the minimum rate is 15.6% per annum. Dom.rf Bank is ready to issue mortgages at a starting rate of 15.8% per annum, at VTB rates start from 16.4%, at Otkritie Bank - from 16.69%, at Uralsib - from 17.29%, follows from the information on the banks’ website (current as of 12/17/2023).
To support sales in the primary market, mortgage rates can be subsidized by the developers themselves. Such programs are still in effect now, and they will probably remain next year, analysts suggest. Joint programs with subsidies on the market exist, but the size of the subsidy has become smaller - from 5 to 30%.
“It is unlikely that developers will compensate for the increased mortgage price with subsidies, since their lending conditions will also change,” experts say. “Most likely, installment plans will be used more often.”
Today, the trend is the so-called “hybrid” mortgage, part of which is subsidized by the developer.
“For example, if a client needs to take out a mortgage for 15 million rubles, the developer and the bank provide a subsidy that allows the client to take out a mortgage at a rate of 5%. The bank will be paid a commission. A hybrid mortgage will be especially relevant if the limits on state support are lowered,” experts explained.

 

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