Page 93 - RusRPTJul21

In total, as of June 1, 2021, within the framework of the 6.5% program, loans were issued in the amount of more than RUB1.5 trillion. Taking into account the announced plans to extend the 6.5% program for another year but at the higher cut off rate of 7%, the CBR was expecting a surge in new mortgages in June as Russians tried to get in the old program before it expired and moved to the less generous subsidy. All-in-all the CBR is expecting through to the end of the year an increase in mortgage lending at the level of about 20%.
President Vladimir Putin announced on June 4 modifications to the state subsidised mortgages programme during his address to the St Petersburg International Economic forum. It is to be prolonged for one year but see a 50bp rate increase to 7%, while the mortgage limits are cut from RUB12mn in the Moscow and St Petersburg metropolitan areas and RUB6mn in other regions, to RUB3mn for all areas. The latter is the prime change in our view. It is likely to cool the rapid price growth (20-25 y/y in 2021F for the capitals) and move origination to a more rational path (some 50% y/y higher). Listed developers are also going to see a return from elevated levels of credit deals (70% blended in 1Q21) to fair penetration (60% a year ago). Partially offsetting this, the family mortgage programme (with a 6% rate and a limit of RUB12mn for the capital and RUB6mn for the regions) is to lower its participation parameters: it will now require one child born after 2018 (vs. at least two before). We keep a conservative stance on public homebuilders but anticipate their operating results to reflect announced changes, with volumes likely lower in the medium term.
· The subsidised mortgage programme, a support initiative for the development sector that was severely hit by the first wave of lockdowns as well as the construction freezes, was launched with a 6.5% rate in April 2020. Prime developments after the launch were the 1.5-2x hikes in the limits to RUB12mn for the capitals and RUB6mn for other regions, as well as its prolongation until 1 July 2021 (from 1 November 2020 originally).
· The programme became the prime driver for the market and total origination surged 51% y/y in 2020 to RUB4.3tn. The blended rate lost 160bp through 2020 to 7.4% and remained flat thereafter.
· The prime implication for the residential sector was surging prices. They gained 20% y/y last year for the country and a blended 15% y/y across the Moscow and St Petersburg metropolitan areas. We see the trends as reflecting limited opportunities from developers to raise the market offer, driven by portfolio limitations, while the price surge mostly covered the growing availability on the lower rates.
· Listed developers were the prime beneficiaries of the elevated demand in 2020. PIK demonstrated the strongest results, with residential sales up 20% y/y to 2.35mn sqm, outperforming peers as it has the widest and most dynamic portfolio. Across the listed universe, we note the blended surge in the share of mortgages in sale, to 70% in 1Q21 from 60% a year ago. We anticipate a
93 RUSSIA Country Report July 2021 www.intellinews.com