Due to the increase in mortgage rates, buyers are increasingly rejecting deals in the secondary market and opting for renting. The difference in monthly payments turns out to be too serious, clarified Anatoly Pysin, the general director of a real estate agency.
To afford a secondary apartment with a mortgage, a buyer needs to save up for the down payment, which has increased, go through tougher bank selection criteria, and then agree to a high interest rate. But not everyone can meet all these conditions today. People have started taking out significantly fewer loans, and those who do not own real estate have entered the rental market, increasing demand.
Pysin notes: there is always a correlation in the residential real estate market between the rental payment amount and the mortgage down payment. If the difference is small, it motivates people who aim to buy their own housing to take out a mortgage and start the buying process. If the mortgage payment is significantly higher, most people still choose renting, which is happening today.
“There are many examples today when buyers, due to high mortgage rates, refuse to buy housing and continue renting. A person recently contacted our agency who is considering buying a property and asked to calculate what the monthly payments would be. While we were calculating, we realized that for now, he will continue to rent, as the amount of the mortgage payment is very high. Not everyone can afford it,” the expert says.
For example, when buying a one-bedroom apartment in Moscow for 12.5 million rubles with a mortgage for 20 years at 17.5% annual interest with a down payment of 2.5 million, the monthly payment will be just over 150 thousand rubles. Meanwhile, the rent for a good one-bedroom apartment in Moscow, even after the price increase, starts at 60 thousand rubles. The difference with the monthly mortgage payment is almost 2.5 times.
“Under such conditions, of course, most people will not be willing to give up renting and acquire their own real estate,” the interviewee concluded.
According to the speaker’s estimates, in the last six months, rental rates for apartments in the Moscow market have increased by at least 20-25% for new offers. Owners who rent out their apartments for long-term rental have also started reviewing prices upwards. In most cases, this involves indexing rental payments within 10%.