Support the growth of the credit boom in real estate prices

Support the growth of the credit boom in real estate prices

IC “Renaissance Capital” yesterday published a review of the Russian economy in 2006. Analysts attributed the sharp increase in lending in Russia, including the rapid growth of the property is used as collateral for loans, and believe that this effect will be “a very strong incentive” to keep the credit and the consumer boom in 2007, “Kommersant”.

Loans in Russia have become available not only to large borrowers who can provide collateral, but for the average household, and in 2007 the opening of credit facilities will already have a macroeconomic impact. According to the “Renaissance Capital”, the volume of mortgage lending in September 2006 compared to September 2005, increased by 356%, and the consumer – by 80%. At the beginning of 2006 mortgages were issued in the amount of 53 billion rubles, on October 1, 2006 the amount of loans amounted to 160 billion rubles. It is only about 0.7% of GDP, but growth suggest the impact on the economy as a whole.

Analysts at investment bank noted that the increase in the credit market against the background of extremely high rates. Economists estimate that the interest rates on loans for small and medium business “in dollars or rubles,” range from 15% to 30%. Mortgage rates range from 13% to 17% of consumer – 25-55%. The “banks are under 8.10% in rubles,” the review says. In the interbank market, the real interest rate remains negative, below the current inflation rate. Gavrilenkov, chief economist of “Troika Dialog”, said that now the average interbank lending rate – 7-8% per annum.

As economists, “Renaissance Capital”, and questioned by Kommersant experts believe that nominal interest rates in Russia in 2007 will be reduced and by reducing inflation and inflation expectations, and by increasing competition in the financial market. However, according to Oleg Solntsev from the Center for Macroeconomic Analysis and Short-Term Forecasting, interest rates in the world grow and below international rates in Russia will not fall. “Right now, the U.S. rate of loans to enterprises up 8.9%, in Russia – 10-12%. U.S. rates are lower limit for us,” – he said.

“Renaissance Capital” says borrow and consume the citizens of Russia promotes, among other things … an increase in property values of their property – this factor not previously considered as significant. The review notes that in 2006 the average price of apartments in Russia increased by 8000 dollars, in Moscow – 38 thousand dollars. “The potential effect of wealth, while lending has become available, can be a very powerful stimulus to consumption,” – said in the review. In other words, a significant impact on the situation is a sharp rise in potential security deposit.

However, according to Oleg Solntsev, increase security amount will affect the behavior of borrowers with a high income. Agrees with him and Mr. Gavrilenkov – in the “Troika Dialog” predict that the situation will change radically when real interest rates in the interbank market will be positive. Gavrilenkov believes that if current oil prices are stable, and currency inflow to Russia will be reduced, it will happen in six months – by the summer of 2007-the year.