An increase in the key rate to 21%: how this will affect the real estate market and mortgages

VTB has already admitted that it will increase the rates on its credit products in the near future following the increase in the Central Bank’s key rate. First of all, the change in conditions will affect mortgages, RIA Novosti reports with reference to the bank’s press service. Market participants may pause auto and consumer loans, the agency writes.

The stakes have increased

Other banks will not be able to raise mortgage rates after October 25; They did it a week before the expected decision of the Bank of Russia. As RBC reported, in the week before the increase, mortgage rates rose by an average of three percentage points. For example, Sberbank announced an increase in mortgage rates; Taking into account all the discounts, it was close to 25%. The minimum market mortgage rates at VTB this week started at 25.7%. Gazprombank and Sovcombank raised rates in advance, the publication writes.

Experts associated the behavior of the banks with the forecasts for an increase in the key interest rate, which were fulfilled.

“Loan and mortgage rates may also increase further, although many banks have already increased them, predicting the current decision of the Central Bank,” Valery Tumin, member of the expert council on development of the digital economy of the Duma Committee State. on Economic Policy, he told RB.RU.

According to experts, the key interest rate could affect the pace of housing commissioning in Russia. In an interview with RIA Real Estate, the top manager of the A101 developer, Rustam Azizov, indicated that the developers could suspend the launch of new projects on the market and reduce the commissioning of housing in the next 3 to 5 years if the type of key change continues to remain at a high level. The director of the ERZ.RF portal, Kirill Kholopik, expects a reduction in the start of new construction of apartment buildings, mainly when the sales price is low.

According to the co-founder of the Buhlovo Park eco-hotel, Roman Filippov, against the background of rising rates, the demand for mortgages will decrease, and the demand for suburban real estate will increase.

“This is a more affordable option than urban residential properties. Judging by the cost per square meter and the level of comfort comparable to that of the city, many will prefer a rural lifestyle with their own house and land instead of a small urban apartment,” said the expert. On average, such an apartment will cost more than 2.5 times more.

What Nabiullina said about the real estate market

At a press conference on October 25, the head of the Central Bank, Elvira Nabiullina, spoke about the future of the real estate market in Russia after the interest rate increase. The demand for housing will return to the levels it had before the massive preferential mortgage; During its implementation, the cost of apartments doubled, said the head of the Central Bank. Nabiullina added that the price of apartments in the primary market is already falling and buyers have begun to invest their savings in the purchase and avoid mortgages.

“Activity in the construction sector will cool down, but developers will cope, they have a safety net,” Nabiullina said (cited by RIA Novosti).

The head of the Dom.RF analytical center, Mikhail Goldberg, said on the RBC-Real Estate telegram channel that in 2025 banks could issue 1.3 million mortgage loans instead of the 1.5 million initially planned in the context of a key level review.

But Dom.RF maintains the forecast for granting mortgages for this year: between 1.4 and 1.5 million mortgage loans worth 5 trillion rubles.

According to Goldberg, the most important thing that has happened is that the Central Bank changed its forecast for 2025 and expects the average level of the official rate to be 17-20%.

“This trajectory could even allow an increase in the key interest rate to 24% by mid-year with a further decrease to 17-18%, or the same level of the 20% rate throughout next year,” Mikhail Goldberg he said in an interview with RBC Real Estate.

Offices will become more expensive

The rate hike will also affect the office real estate market.

Due to the increase in the key rate in 2025, the increase in prices for class A and B properties under construction in Moscow will be at least 15%, and the weighted average rental rates for office spaces will increase by at least one 7%, says Evgeniy Tamoshin, CEO of the consulting firm Wewall.

“Economic factors, such as labor shortages, rising costs of construction materials and engineering equipment, as well as high interest rates, contribute to rising construction costs, which inevitably will lead to an increase in prices for office real estate,” he said in Timoshin’s press service. quotes him saying.

Despite the continued increase in the Central Bank’s official interest rate, investments in commercial real estate and institutional transactions with land for development and renovation continue to break records, says consulting firm IBC Real Estate.

“The market has entered a prolonged period of tight monetary policy. At the same time, investors remain interested in quality properties and continue to purchase them,” the company’s analysts report. The total volume of investments in the Moscow real estate sector at this time (end of October 2024) has reached 742 billion rubles, the current value of investments has already exceeded the annual result of 2023 by a third.