Russia’s primary housing market is showing clear signs of overheating, the Central Bank warned this week, citing rapid price growth and an unsustainable rise in borrowing. Although the end of subsidized mortgage programs and high interest rates have slowed new mortgage issuance, the risk of a market correction remains elevated.
According to the Bank’s latest report, the average mortgage loan reached a record 4.4 million rubles (approximately $54,900) in April, a 10% increase since the beginning of the year. Loan durations also hit a new peak—nearly 26 years on average. With interest rates hovering around 30%, a buyer with a standard loan and a 20% down payment could end up paying over 14.6 million rubles across the life of the loan. Meanwhile, the secondary market, resales of existing properties, remains relatively stable due to reduced demand and high, unsubsidized mortgage rates.
The report comes amid broader economic pressure. Inflation is projected to reach 7.6% this year, while the Central Bank’s key interest rate has remained at 21% since late 2024 to fight rising prices. These conditions have significantly reduced housing affordability, which has dropped 60% compared to March 2020, according to the Central Bank’s own calculations.
To maintain sales in the high-rate environment, many developers have shifted to offering installment plans directly to buyers. In regions such as Kazan, over half of new properties are now sold using this method. However, the Central Bank has expressed concern that such schemes lack proper oversight and could obscure hidden financial risks.
“The risks associated with developer installment plans are growing,” the Bank noted, warning that these arrangements may carry concealed debt burdens and complicate efforts to assess the market’s true exposure.
While housing construction and rental prices have grown steadily in recent years, the combined impact of stretched loan terms, expensive credit, and reduced consumer purchasing power could weigh heavily on the sector.
The Central Bank’s alert signals a need for greater scrutiny of Russia’s real estate financing practices. Without targeted policy intervention, the current trajectory could lead to a correction in the primary market—one with broader implications for household debt and economic stability.
