‘Highly unaffordable’: why Kazan lagging behind in housing affordability rating in Russia

One will have to save for an apartment in a new building in the capital of Tatarstan for 7 years without spending salary on anything else

‘Highly unaffordable’: why Kazan lagging behind in housing affordability rating in Russia
Photo: realnoevremya.ru

Today, in Russia there are various state programmes to support the population in the housing issue. But at the same time, the Central Bank has recently directly linked the decline in housing affordability in the country with preferential mortgage. The regulator calculated that a Russian citizen has to save for an apartment in a new building for 8 years in the absence of other costs. Following the same calculations, the analytical service of Realnoe Vremya compiled its rating of housing affordability in the regions of Russia based on data from Rosstat, Institute of City Economics, and other services. Kazan agglomeration found itself at the very end of this list along with St. Petersburg and Nizhny Novgorod. Why housing in the capital of Tatarstan remains unaffordable and what solutions to the problem are offered by developers and real estate market participants themselves — in our material.

Housing in Kazan is “highly unaffordable”

A Russian needs eight years to save up for an apartment in a new building while “not drinking or eating," the Central Bank calculated. A decrease in housing affordability in the country has also been stated in the Institute of City Economics Foundation.

The analytical service of Realnoe Vremya has compiled its rating of housing affordability by regions of Russia based on data from Rosstat, the Institute of City Economics, and Domclick service (average market prices). Housing affordability in the country is calculated by the formula and methodology in the decree of the Government of the Russian Federation No. 323 as of April 15, 2014 and other regulations.

For example, in Russia, the housing affordability coefficient (KDZh)* consider the period for which a family of three people (two working spouses and one child) can save up for an apartment of 54 sq. m. At the same time, it is important to take into account that the entire salary of parents will go only for the purchase of living space.

The coefficient is calculated as follows: KDZh = (average price of square metre of housing × total area of the apartment) / the average monthly salary of the spouses for the year. Thus, the KDZh reflects the relationship between the market value of housing and the income of citizens.

The rating shows the housing affordability coefficient (KDZh) and its interpretation for the largest urban agglomerations. For example, the Kazan agglomeration is on the bottom lines with the mark “Housing is highly unaffordable”.

Lowering the rate for large apartments

Thus, Tatarstan citizens with an average salary of 53,6 thousand rubles (according to Rosstat) and with an average market price of a square metre of housing on the primary market of 165 thousand rubles (according to Domclick) will need an average of 7 years to save up for an apartment in new buildings in Kazan and its surroundings. With the condition that they will not spend their income on any other needs.

According to this indicator, the Tatarstan capital is at the very end of the housing affordability rating along with Nizhny Novgorod, St. Petersburg, and six other major cities (it will take from 5,1 to 7,2 years to purchase an apartment). It will also be difficult to buy an apartment for residents of Perm, Yekaterinburg, Samara and three more agglomerations (from 4 to 4,7 years). Families of Saratov and Krasnoyarsk will save for less than 4 years for living space.

Nevertheless, in Russia there are a number of state programmes and new initiatives are being adopted that are designed to support the population with the purchase of an apartment or house.

“The issue of increasing housing affordability is always supported by the state," said Aygul Latypova, the executive director of Ak Bars Dom. “It is worth paying attention to such an aspect that in our country, within the framework of federal national projects, there are a number of state programmes to increase housing affordability. For example, to date, the number of families who have taken out a loan under the Preferential Mortgage programme in Russia has exceeded one million.”

“This programme has proven itself among the population for several years, becoming one of the most popular preferential mortgage programmes in the country, improving the housing conditions of Russians and providing significant support to the construction industry. Besides, the issue of increasing the availability of large apartments is under the control of the state. For example, recently, the State Duma has started considering a proposal to reduce the mortgage rate for apartments with an area of more than 55 square metres within the family mortgage. The measure will certainly also increase customer interest," the speaker believes.

The average market value of housing in the republic continues to grow. For example, in Kazan over the past month, the price of a square metre in new buildings exceeded the mark of 181 thousand rubles. Therefore, the vast majority of Tatarstan families do not have enough of their own savings to buy an apartment, but it is unprofitable to save for real estate for years today, experts say.

“If you save money, then housing in Kazan will really be unaffordable. We must use every opportunity to make money cheaper today than money tomorrow. And if we postpone what we have earned, it turns out that we devalue our work. Money should work. For example, a teacher has recently bought an apartment from us, who has about the same salary — around 50 thousand rubles. He chose a two-bedroom apartment in a new building in the Sovetsky district and still managed to make the minimum payment with a rate of 4%. It is now the Central Bank has tightened the requirements for borrowers. Everyone who bought real estate through us, over 8 years, at least paid out their apartments, and then came back to expand the living space," says Anastasia Golyasheva, the president of the Guild of Realtors.

Photo: realnoevremya.ru

“Mortgage limit for Kazan needs to be raised”

As a rule, a third of real estate transactions in the republic account for mortgages. And the volume of housing loans issued constantly increases.

“Interest in mortgages from real estate buyers is steadily growing," confirms Aygul Latypova. “At the same time, we are concerned about the limit set for Kazan on state programmes of 6 million rubles, which is not sufficient today and allows us to buy either a one-room or a small two-room apartment. The limit should be raised to at least 9 million rubles, at least for Family Mortgage, so that housing for families with children, who more often go to expand the living space, becomes more affordable. Kazan developers have repeatedly raised this issue.”

In addition, there may soon be a problem with the affordability of mortgage itself. Mortgage rates are forecast to rise in Russia. Experts believe that, despite the positive dynamics of the market, there are factors that can negatively affect the volume of mortgage issuance in the country. Among them — an increase in the value of federal loan bonds (OFZ), an increase in macroprudential requirements of the Central Bank for mortgage loans, and the initiative to impose obligations on banks to pay mortgage debt after the sale of a mortgage apartment if the proceeds are not enough to repay the debt.

Nevertheless, at this stage, buying an apartment under state programmes makes housing much more affordable for Russians, analysts say.

“If we are talking about that a person takes a mortgage — social, family or other, he invests some funds — maternity capital or some minimal savings, and as a result, it becomes completely different money for them. Imagine, 8 years ago I would have started saving — in 2015 or even earlier — in 2014, when a dollar cost another 35 rubles, and a year later the cost of the apartment would have doubled. I would not have been able to buy it unequivocally, inflation would have eaten up the money. There are a lot of tranche mortgage programmes now. This is when the first 2-2,5 years you can pay a ruble a month at all, even though the apartment will come out a little more expensive than the market average. If a family takes out such a mortgage, at the start it may not even pay," Anastasia Golyasheva gives examples of options.”

Another reason for expensive housing in Russia is the high cost of construction, developers say. In particular, now a new surge in the price of building materials in the country has caused an increase in metal prices, which many consider completely unreasonable:

“How to contain the rise in prices in new buildings if materials are getting more expensive all the time? For some reason, metallurgists are not asked this question. Why on earth is metal now 20% more expensive?! This is a seasonal increase, but on the basis of what prices have risen? And they rise to everything, we can say, 90% of the materials. But why? Hence the rise in housing prices. I'm buying the material today and now I'm going to install it in concrete, and the fact that it will become cheaper in the autumn... Then I will not be able to fall in price, because the costs have been incurred," explains the director of Briz construction company, Andrey Belyakov.

According to him, state support of developers or at least reduction of encumbrances in the construction sector would help to make housing more affordable in Russia.

“If we try to reduce the load at least in terms of the construction of networks, this will lead to a reduction in the cost of facilities, and then developers will have the opportunity adjust the price of housing downward. As for its availability in Kazan, it all depends on location. We have facilities in Kuyuki, where we sell apartments for 80-90 thousand rubles per square metre, and the average price in the city is about 150-160 thousand rubles per square metre," Andrey Belyakov believes.

Exposition period has increased

By this year, according to real estate market participants, the period of exposure of ads for the sale of apartments has also increased — the number of days between the date of publication and the date of sending the first document to the bank (for the secondary market). So, in Tatarstan, the changes amounted to 50%.

Vasilya Shirshova, Syumbel Gubaydullina