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Crisis not on agenda: Mortgage lending continues to grow in Moscow

February 29, 2008 | RBC

The Russian capital's mortgage lending market figures rose rapidly in 2007. The number of granted loans increased 43.6 percent, with their total value reaching RUB 73.5bn (approx. USD 3.05bn). Meanwhile, these results indicate a slowing mortgage market, as it more than doubled in size a year earlier. Experts note that amid a global mortgage crisis, the Russian market is still showing fairly good results, and project a further 40-55 percent increase in mortgage lending to in 2008.

According to Moscow administration data, nearly 19,400 mortgage loans were granted in 2007, 43.6 percet more than in 2006. The rise in the total value of loans is somewhat smaller, at 40 percent, with the average loan size reaching $152,000. However, the mortgage market showed more impressive results in 2006, as the total value of loans increased more than twofold compared to the previous year.

Despite the slight deceleration in growth, market participants are pleased with the results. “Against the background of the global mortgage crisis, our market showed fairly good results,” General Director of the Moi Dom mortgage company Alexei Turchenkov noted. “Nevertheless, the market is currently experiencing a shortage of long money as foreign banks have closed their credit limits for emerging economies, including Russia.”

However, the overall demand for mortgage products and the level of activity of the market's principal participants is not expected to decrease in 2008, the Gorodskoi mortgage bank's PR advisor Yekaterina Pravdina believes. “Given the situation on financial markets, mortgage lending will not grow as rapidly as in 2006, but a 40-50-percent increase is quite possible.” According to Fosbourne Home's projections, mortgage lending will grow 50-55 percent in 2008, with the average loan size rising by 15-20 percent. “These estimates account for the increase in both housing prices and household incomes,” Fosbourne Home's General Director Vasily Belov explained.

Deputy chief of Moscow's City Planning Deparment Vladimr Khaykin is confident that mortgage is becoming more affordable each year, even despite the increase in the average loan size in 2007, which he attributes largely to the global mortgage crisis and the ensuing stiffening of lending terms. “The fact that the city has its own mortgage scheme has contributed to the development of mortgage in Moscow,” Khaykin added.

Head of Incom Real Estate's mortgage lending office Lev Pletselman agrees. “Mortgage loans are becoming less of an exotic product applied exclusively to the purchase of real estate in the capital, turning into a fairly conventional instrument for solving housing issues.” He says that mortgage was booming on the housing resale market last year. According to Incom Real Estate data, the share of transactions with the use of mortgage loans currently stands at 20-25 percent in Moscow. Fosbourne Home data shows that one-room apartments and the so-called “investment housing” (highly liquid business-class new average-sized housing, as well as luxury property) remain the most attractive segments for mortgage.

Analytical department of RIA RosBusinessConsulting


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