Mortgage debt 20 times lower in Russia
In Russia, the level of mortgage debt is 20 times lower than the average level in the European Union, according to the experts at Deloitte, who carried out a survey of the European real estate market for 2012.
The average share of mortgage loans in the EU accounts for 51.7 percent of the GDP. The highest level was recorded in the Netherlands and Denmark, and the lowest was found in the Czech Republic.
In Russia, the share of mortgage loans is five times less than the minimum level in the Czech Republic — only 2.6 percent of the GDP. The level of mortgage debt per capita in Russia is also the lowest — just $415, which is seven times lower than in Poland (the minimum level in the EU is around $3,000).
The share of total retail debt in 2012 accounted for only 12 percent of the GDP, note analysts at Alfa Bank. This is an excessively low level of debt, not only for the developed countries (in most of them, this debt is above 50 percent of the GDP), but also for the countries of Central and Eastern Europe.
For example, in Lithuania, Poland, Hungary and Latvia, the debt burden of the population is 30–40 percent of the GDP, analysts wrote. The share of non-mortgage loans accounts for 9 percent of the GDP, which is much higher than in some developed economies, such as France and the United States.
The growth pattern in Russian retail lending indicates that people prefer short-term loans, according to Alfa Bank analysts. The amount of non-mortgage debt is already approaching its limit (70 percent of the growth in retail lending in general); the potential for growth in the mortgage lending market in Russia is great, but high prices for real estate are hindering its development.
In general, the Russian retail lending market consists of unsecured loans; Europe went through the same path of development, says Ivan Pyatkov, director of Promsvyazbank.
According to the National Bureau of Credit Histories, mortgage loans account for 24.7 percent of the total amount of existing loans, while consumer loans account for 48.5 percent. Auto loans and credit cards account for 14.3 percent and 12.5 percent, respectively.
Another reason for the low share of mortgage debt is its inaccessibility. The availability of mortgages is much lower for the average Russian citizen than it is in Europe, due to the level of income and property values, says Andrei Maltsev, deputy chair of Nordea Bank.
European banks offer lower costs of resource base and longer terms of funding, and therefore mortgages are cheaper, explains Pyatkov.
“In Russia, banks do not earn profits on mortgage products; the average margin is 2–3 percent, and the final rate for the borrower is 12–14 percent, which is expensive to maintain,” said the Promsvyazbank director. Pyatkov believes that mortgage lending will grow faster than unsecured loans, but the economy needs cheaper money.
First published in Russian in Vedomosti.