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90% collapse: developers in St. Petersburg paint a bleak picture of the future
According to the Central Bank of the Russian Federation's report "Economy of the Regions", 3,701 mortgage housing loans were issued in St. Petersburg in September of this year, which is 58.5% less than in the same period last year.
The annual growth rate of the mortgage portfolio has decreased to 10% (in February 2024, this figure was 23%). The decrease in demand is due to the completion of outstanding priority mortgage programs, changes in the terms of other government programs, and an increase in market interest rates.
Ksenia Sadkova, Legenda’s sales director, believes that a rate of 15-16% could signal a return to a more stable and predictable market. “Higher mortgage rates reduce demand and delay the launch of new projects, which leads to a supply shortage and higher prices,” she says.
Chairman of the RBI Group Eduard Tiktinsky largely agrees with her. According to him, the optimal rate for buyers is in the range of 10-13%. However, it will not be possible to reduce the base interest rate to 8-11% before 2026.
"If family mortgages are not extended under current conditions and new target programs appear, demand for housing will fall by at least 90% compared to the first half of 2024. Without effective sales tools, developers may be deterred from entering the market for new projects and purchasing land. This is due to the fact that higher rates also affect the bridge loans that developers use to replenish their land banks. Rustam Azizov, Director of Financial Product Implementation at A101 Group of Companies, said that the number of new homes will decrease in the next three to five years.
"The lower the base rate, the faster the market develops and new projects are launched. For example, very few business centers are currently being built in St. Petersburg, and this is due to two factors: expensive borrowed funds and a reluctance to do so. A significant improvement in one of these parameters may allow developers to speed up active construction," says Oleg Dmitriev, Chief Operating Officer of Hansa Group.
In his opinion, the construction market of St. Petersburg has another problem: a significant shortage of land for construction. Developers have nowhere to get it, and urban development policy and attitude to the protection of public buildings and monuments, combined with high key rates, make redevelopment and reconstruction projects unprofitable.