Russian mortgage market could reach its record high in 2011

Russians have become more open to mortgages, as their volume grew almost 80% year on year in 2011, experts say.

The mortgage market has been dynamically recovering in 2011 and, according to expert estimates, should reach its record high of 681 billion roubles this year. Sberbank, Russia’s biggest bank and traditionally the main market driver, gave out 304 billion roubles in mortgages during the first 11 months of 2011, says Natalia Karaseva, advisor to the Deputy Chairman.

In fact, the amount of mortgages given out in 2011 has already exceeded pre-crisis numbers, says Anna Lyubimtseva, Head of the Analytical Center at Russia’s Agency for House Mortgage Lending (AHML).

“October 2011 was a remarkable period for the development of mortgages in Russia, as the amount of mortgages allowed during the first 10 months of 2011 was above the level for 2008 entirely, at 349.5 thousand loans.”

Smaller Russian banks are now getting a bigger say, says Vadim Pakhalenko, director at a department for financial institutions at Delta Credit Mortgage Bank.

“Competition is growing, which pushes banks to offer better lending terms.”

Indeed, Russian mortgage players have also become more loyal to their clients, agrees Natalia Karaseva. The rates in particular reached its lowest in the whole history of mortgage lending in Russia, standing at the average of 12.1% for mortages in roubles in November, added Pakhalenko.

In some cases mortgage rates are even lower, in certain cases below 8%, AHML adds.

“AHML programmes have had a significant effect on the market, which got new benchmarks: 7.9% for new housing, 8.9% for a secondary market,” says Anna Lyubimtseva.

But the economic unrest in the EU remains one of the main threats to the mortgage market, especially if the financial situation there worsens.

“Given the high uncertainty, people would be much less willing to take out long term borrowing," explains Pakhalenko.

The rates could really go up in the first six months of 2012, Lyubimtseva agrees. However, should the world economies avoid a sharp shock, and inflation in Russia be at the forecasted 5-6%, they’ll return to 2011 levels, with “the Russian mortgage market growing around 12.5% during 2012,” concludes Pakhalenko.