BUSINESS

Local Real Estate Market Sees Stagnation

By Natalya Chumarova, Nadezhda Zaitseva and Anatoly Tyomkin

Vedomosti

Bloomberg The slump in the global real estate market is now being felt in St. Petersburg, where mortgages have decreased since June.

The number and volume of mortgages issued in St. Petersburg fell by almost 30 percent during the third quarter of this year. From June to September, 3,901 mortgages were taken out in St. Petersburg, totaling 10,739.2 million rubles ($408 million). Until now, the mortgage market had only ever seen positive growth.

Loans issued in accordance with the City Mortgage Program fell by 50 percent, from 219 loans totaling 532.7 million rubles ($20.24 million) to 110 loans totaling 237.2 million rubles ($9 million). In August, 26 banks accredited by the program stopped providing mortgages due to changes in the conditions set by the Mortgage Agency and a lack of long-term funds, said Sergei Miliutin, head of the development department of the St. Petersburg Mortgage Agency. He said some of the banks had already resumed offering mortgages.

In August and September, banks started to shut down their mortgage programs, introduce stricter lending conditions and increase rates, said Igor Zhigunov, deputy president of the City Mortgage Bank. Many reduced the quota of mortgages given, according to Miliutin. The stagnation on the real estate market that set in at the end of spring was reflected in indexes, said Zhigunov.

Miliutin estimates that interest rates on loans have increased by two percentage points to 15-18 percent. During the last month, the average rates on loans in St. Petersburg have grown by 1.5-2 percentage points up to 14-16 percent for loans issued in rubles, and by 1-1.5 percentage points up to 11.5-12 percent for loans issued in other currencies, said Anna Ivanova, the head of public relations of the St. Petersburg branch of Fosborn Home mortgage brokerage.

Bank St. Petersburg increased its rates, and the number of potential clients seeking to obtain a loan decreased slightly, said Anna Barkhatova, the manager of the bank’s press service. The bank has always adhered to strict conditions when processing loan applications, so the number of unsuccessful applications will not increase, she said.

Since the start of autumn, the City Mortgage Bank has been handling more applications, but the number of loans granted has decreased due to the fact that banks, including the City Mortgage Bank, have tightened underwriting requirements, said Zhigunov. The number of loans granted has decreased by 17 percent at Absolut bank and by a third at KIT Finance. Banks are withdrawing from the mortgage market and the number of loans issued will diminish, said Ivanov.

More stories by this section:

Putin Announces Measures | Carlyle Sues NLMK For Reneging on $3.53 Bln Deal | In Brief | State Seeks to Help Out Ailing Domestic Airlines | Ukraine Struggles Amid Crisis | Gazprom Invited to Explore Just Off Alaska | Medvedev Asked to Intervene to Help Minority Investors | VEB to Acquire Globex Bank for $190 | Banks Borrow $14.85 Bln

Or take part in the discussion below.