The economic situation in Russia is now rather complicated, and many citizens are thinking about ensuring the safety of their savings by investing them in the purchase of an apartment. Some intend to invest in real estate at the expense of personal funds, others rely on a bank loan. But is it worth it now to take housing in a mortgage? Perhaps there are more appropriate ways to invest?
Mortgage in crisis: two groups of indicators
To answer the question of whether it is worth taking a mortgage now, when Russia has a difficult economic situation, it will be useful to first analyze what are the key components of the banking crisis, which analysts talk so much about. Then we’ll try to determine how guilty of the EU and US sanctions against Russia are to blame for this situation - they are the ones who are prescribed the key role in the fact that crisis trends have arisen in the Russian economy.
So, what are the problems in the national banking system of Russia? Experts identify two main groups of crisis indicators, which, in turn, are formed under the influence of a large number of various factors.
The first crisis indicator: the solvency of the population is declining. People simply cannot afford to get new loans. This, in turn, is associated with the following main factors.
Firstly, with rising inflation, rising prices for most consumer goods, especially imported products. The most noticeable rise in price of household appliances. And this despite the fact that real wages, if growing, are not in commensurate proportions. Also, prices for utilities and transport are steadily rising. Result: citizens do not have free funds for servicing loans.
Secondly, it is the debt load of a significant part of citizens. Many do not so much think about whether to take a mortgage now, but how to pay off previous loans. Too many Russians have difficulty repaying their current debt.
Now let's try to determine how the economic sanctions against Russia influenced the emergence of the first crisis indicator. Regarding the first factor, there is probably an effect. Experts attribute the rise in price of products to the food embargo of the Russian Federation against European suppliers - and this is somehow connected with sanctions. This is the Russian answer to them. Regarding the second factor - most likely, the guilt of sanctions is relative. The fact is that the bulk of the loans issued by the Russians long before the complication of the political situation.
Probably, we will also have the right to note that both factors forming the corresponding indicator are interconnected. The appreciation of products and services, obviously, further limits the solvency of the potential borrower, provided that he has loans.
The second crisis indicator: the deterioration of the situation in banks, as a result of the inability of financial institutions to issue loans, including mortgages, and to offer them on conditions that are comfortable for the consumer. Factors of this situation, in turn, are as follows.
First, banks now have extremely limited free capital. In order to give something to borrowers, banks must have something. The liquidity of Russian lending institutions is estimated by many experts as low.
Secondly, banks, oddly enough, are in a similar situation with borrowers - in terms of loans. The fact is that they themselves owe a lot to anyone - foreign creditors, the Russian Central Bank.
In turn, let's try to determine whether the sanctions are to blame in the current situation? Many experts believe that this is so. Why? Proponents of this point of view focus on the fact that a significant part of Russian financial institutions are debtors of foreign creditors. In the years before the sanctions, they actively carried out external loans, taking advantage of the attractiveness of interest conditions. Repayment of debts was largely expected due to refinancing mechanisms - due to new foreign loans. Now, when, under the conditions of sanctions, Russian banks have practically lost the opportunity to lend abroad, financiers need to look for new sources for payments. Many credit organizations, analysts say, do not have their own reserves for this. And even more so they do not have the capital to issue it as loans.
Is the situation in banks a priority?
Forecasts on how the mortgage will develop, what to expect from the market, to a large extent depend, analysts say, after all, on the real state of affairs in banks. The aspect reflecting the activity of potential borrowers is secondary at this stage. Even if the Russians did not have solvency problems dictated by the increase in prices (especially for electronics and other imported goods) and the absence of real wage increases, the situation in the banking industry itself is too far from optimal for the mortgage market to develop as actively as in the last few years, economists believe.
Get back on interest
Most likely, analysts believe that banks, if they wish to actively lend to citizens in a crisis, will do so, significantly increasing interest rates. Or extremely tightening the criteria for approving a loan. Thus, a scenario is possible in which a person does not even have to think about whether to take a mortgage now. Most likely, the bank simply will not be able to provide a loan on comfortable conditions. Or even refuse the application due to internal crisis reasons. Does it make sense now to take a mortgage when the situation in banks is far from optimal? Many experts believe that such decisions are not yet justified.
If the application is approved
Consider a successful scenario - for example, a Russian person has no problems with existing loans, he has a high salary, and the bank, in principle, is ready to give him a loan to buy a home. Is it worth taking a mortgage now for this citizen? The answer to this question can be given on the basis of studying a key aspect of the upcoming transaction: is it not possible that after buying an apartment after a while it will become cheaper so that the mortgage will be unprofitable for a person?
In this aspect, when deciding whether to take a mortgage now, it is most expedient to study the market not so much from the point of view of the crisis in banks and sanctions, but in terms of analyzing trends that reflect the dynamics of real estate purchase and sale. Of course, the political situation plays a role here. But the key factor in the prospects of investment in housing, experts say, is the state of affairs in the relevant market.
Real Estate Market Situation
How are things in the real estate segment? Is it profitable now to take a mortgage in terms of the alleged movement of housing prices? Experts identify three likely scenarios regarding the prospects for market development.
According to the first, real estate prices in the coming years will remain at a level more or less consistent with the current one. Proponents of this point of view believe that the current real estate market in terms of pricing, the ratio of supply and demand is fairly balanced. The potential decrease in purchasing activity due to limited lending by banks and the low solvency of borrowers, economists believe, will be accompanied by a corresponding reduction in supply - largely due to the fact that homeowners prefer to wait out the crisis and not sell housing too cheaply. Is it profitable to take a mortgage now in relation to this scenario? Probably not very. Prices will remain the same, and interest to the bank, which, moreover, is likely to be large due to the crisis, will have to pay.
However, it makes sense to issue an apartment on credit if a person is currently renting a house, and the estimated amount of payments will be commensurate with rental rates. However, this option assumes that the citizen has a significant amount for the down payment on the mortgage. And in this case, it will probably be more profitable to issue it as a deposit, to receive interest, due to which, in turn, to pay for the rented apartment. Some banks now offer to make a deposit of 20% per annum or more. This is due, according to analysts, with an increase in the Central Bank's refinancing rate, which in December rose to 17%. If we take the scenario discussed above as a basis, then from an investment point of view, a deposit will look more profitable than investing in an apartment - it is unlikely that, in this case, it will rise in price by 20% per year, and then by the same amount, while in the case of With a deposit, interest is accrued by the bank in progress.
The second scenario assumes that real estate prices will still rise. This will be associated primarily with inflationary processes. It is expected, for example, that in summing up the results of economic development in 2014, the corresponding indicator will exceed 11%. Even if the demand on the real estate market is not sufficiently dynamic, experts believe, an increase in housing prices, in general, can be expected in proportion to inflation. Is it worth it now to take a mortgage, if we consider this scenario?
Most likely, the guidelines for the potential buyer in this case will be approximately the same as in the case with the first option. That is, you can take out a loan for an apartment if the housing is currently being rented, and interest payments will be the same or not much higher than the rent. Or make a deposit for the amount that has been collected for the down payment, receive interest and thereby pay for rental housing.
The third scenario involves a decrease in housing prices. This will, in turn, be caused by a possible imbalance between supply and demand in the market, which can be fueled by the fact that in recent years a significant new construction fund has been introduced in Russia. Although a significant part of the apartments being built as part of such projects is shared, a significant percentage of them will subsequently be sold at market prices or, for example, resold. This may create, according to some economists, excess supply in the housing market.
Probably, if you follow this scenario, it does not even make sense to wonder if it is worth taking a mortgage now. Of course, this will not be the best option. If it comes to finding profitable investments, then you can pay attention to deposits. If there is a need for housing, it is better to rent it for now, especially since the corresponding rates, as a rule, are reduced after the purchase and sale segment.
Factors are interconnected
Of course, each of the scenarios in the real estate market largely depends on the situation in the banking sector and on the level of solvency of citizens. Therefore, we can say that the crisis factors discussed above directly affect the housing market, as well as any other. At the same time, experts still believe that objective market mechanisms - supply and demand - are formed under the influence of the noted factors to a limited extent. Criteria are very important, reflecting the real need of Russians for certain types of housing, taking into account the impact of migration processes, changes in apartment building technologies, etc.
Dollar rate factor
At the same time, some experts consider it possible to single out the fourth scenario, which implies a significant increase in property prices due to the impact of a unique, in a sense, factor. As you know, the dollar exchange rate almost doubled against the ruble in 2014. However, most currencies of other developing countries, including the CIS countries, have not fallen so much against the American one. As a result, the average salary in dollars in Russia and, say, in Kazakhstan, almost leveled off, or even, perhaps, began to yield to that established in the neighboring country. As a result, apartments in Russia in terms of, say, Kazakh tenge have become significantly cheaper in a number of segments than those of neighbors. Citizens of Kazakhstan eventually come to Russia and buy housing here. This trend, as some economists suggest, may persist and also intensify due to the similar activity of residents of other neighboring countries - Belarus, Azerbaijan, the Baltic states, possibly China. This may to some extent fuel the demand for real estate and cause price increases in dynamics that exceed inflation.
Perhaps a person should study, deciding whether to take a mortgage, the opinions of specialists regarding the fourth scenario, but only if he lives in a border city. That is, this option can be attributed to the number of localized ones.
Thus, we identified the main factors that determine crisis trends in the real estate market, and examined the main scenarios, the study of which will allow us to decide whether it is worth taking a mortgage for an apartment in the current market situation.
Let's try to recap. So, there is a crisis in the bank lending market. Banks, in all likelihood, will not be able to issue loans with the dynamics that they did in previous years, and under the same conditions on interest. Borrowers, in turn, will not always have an objective opportunity to pay on a mortgage. The consequence is a decrease in demand. The cause of the banking crisis is the political situation. Therefore, when deciding whether to take a mortgage now, when the EU and US sanctions are being applied to Russia, we probably say no. It is necessary to wait until the situation in banks stabilizes, they will find new sources of loans to pay off existing obligations, or the Government will help them in this.
The second factor that may influence the decision about whether to take a mortgage right now is the situation on the Russian real estate market. There are three basic scenarios for economists. This stabilization of prices, their small increase, commensurate with inflation, or decline. Or, if a person lives in a border city, some increase in the cost of apartments.
Should I take a mortgage? The pros and cons of this decision in relation to the current market situation are quite obvious. Among the positive aspects is the opportunity to invest profitably if demand grows in the near future. Economists, although they recognize the significant depth of the current crisis, believe that the situation will improve in the foreseeable future - due to a possible return of oil prices, import substitution, and diversification of the country's economy. Also, investments in real estate, at least, will ensure the safety of cash investments in relation to inflation. Among the negative aspects of the decision to purchase a home is the likelihood of falling prices or the absence of their growth is quite high. Neither one nor the other will become profitable for the buyer of the apartment. Also, most likely, at this stage, banks will not be able to offer the borrower a comfortable interest rate.