V. Putin created a real estate bubble in Russia: the authorities were alarmed Business

In the past, it was difficult to convince people to take out loans in Russia. Decades of Soviet propaganda denouncing credit as an unbearable burden had worked. Even after the fall of communism, Russians still referred to the loans as “debt slavery.”

But over the past few years, thanks to a generous state subsidy program for buyers of new buildings, there has been a sharp increase in Russians taking home loans, The Economist writes.

However, excessive state subsidies have led to overheating of the real estate market, which has led to a rapid rise in housing prices, The Economist’s journalists state.

It is noted that in 2020, when Covid-19 was raging in Russia, the authorities, in order to stimulate the economy, increased benefits for those buying real estate in new buildings.

Initially, the banks offered a discount of around 6 percent. an interest rate that was approximately 2 percentage points below the market interest rate. The difference was compensated by the state. Similar concessions were later offered to workers and people moving to the Arctic, Siberia and the occupied territories of Ukraine.

The volume of loans started to grow the most after the start of the war. Last year, banks issued loans worth 88 billion. dollars, or 4 percent. GDP, i.e. significantly more than in 2020.

The attractiveness of the scheme increased further when the Russian central bank started raising interest rates. June the gap between the state interest rate and the market interest rate for housing loans amounted to more than 10 percentage points.

As a result, the Kremlin is paying a big bill. The Russian Ministry of Finance has already spent almost half a trillion rubles on this scheme. Costs may soon increase if July 26. the central bank will raise interest rates to 18 percent.

In addition, the boom in subsidized loans created a housing bubble. 110 million were built last year. sq. m of housing, compared to an average of 59 million sq. m in previous years. Prices are also rising rapidly. The Moscow Institute of Urban Economics estimated that in 2020-2023 in big cities, the price of housing increased by 172 percent.

Elvira Nabiullina, head of Russia’s central bank, blamed government subsidies for “overheating” the housing market, according to The Economist. Under pressure from Russia’s central bank and the Ministry of Finance, the Kremlin took action. December. increased initial contribution from 20 to 30 percent. And at the beginning of this month, the popular incentive for buyers of new apartments was discontinued. Analysts predict that in the second half of the year, the number of new housing loans may decrease by about 50 percent.