BOFIT Weekly Review 2015/03
Despite rapid growth, Russia’s housing loan market is still relatively small
Starting from a very modest level, the total stock of housing loans issued by banks has increased at over 30 % a year since 2011. As of end-September 2014, the stock of housing loans stood at 3.35 trillion rubles (€45 billion), up from 1.07 trillion rubles in 2008. At that time, just 17 % of housing purchases involved bank financing. In the first nine months of 2014, bank financing was involved in 28 % of all housing deals. Housing loans last year represented about 30 % of the stock of bank lending to households.
The average length of a housing loan has fallen from nearly 18 years in 2008 to just over 12 years in 2014.
Russia’s biggest provider of housing loans by far is Sberbank, followed by VTB24. The two state-owned banks together account for over 70 % of housing loans currently on issue. Other banks issuing housing loans are typically mid-sized privately held banks.
The price of housing loans today reflects last year’s rising economic uncertainty and across-the-board hikes in interest rates. Sberbank in December raised its average rates on new housing loans to a range of 14.5–15.5 % p.a., while the average rate of a VTB24 housing loan hit 14.95 %. In the case of certain private banks, the price of housing loans has risen to as much as 17–20 %. In recent years, the average interest rate for all housing loans on issue has averaged over 12 %.
Faced with rising risk in housing loans, banks began to deal with their exposure late last year by tightening lending criteria (e.g. raising the size of the downpayment requirement for the borrower).