Escrow Accounts' Funds Held by Central Bank See Significant Upward Trend, More Than Doubling in Value
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In the first half of 2025, the Russian real estate market experienced a significant slowdown, with builders attracting only half the amount of loans compared to the same period the previous year, totalling 1.17 trillion rubles. This decline was mirrored in mortgage lending, where the total issuance amounted to 1.5 trillion rubles, marking a 47% decrease year-on-year.
The slowdown in funds growth is primarily due to the reduced housing demand and subsequent drop in mortgage lending. In June 2025, funds growth amounted to only 39.7 billion rubles, a fifth of May's figure and an eleventh of June 2024's. Total funds on escrow accounts reached 6.8 trillion rubles, showing only a 1% year-on-year increase.
Interestingly, 1.2 trillion rubles in funds did not reach escrow accounts due to installment schemes in the first half of 2025. This underscores the reduced mortgage lending, with many buyers opting for such schemes to manage the high mortgage rates.
The average project financing rate in Russia increased from 6.9% in June 2024 to 10.75% in June 2025. This rise in interest rates, coupled with the end of the state-supported mortgage program and economic challenges, has made homeownership unaffordable for most people, leading to a sharp drop in mortgage demand and apartment sales.
New project launches decreased by 22% year-on-year in the first half of 2025. The Russian Central Bank's high key interest rates, initially around 20%, indirectly affected the real estate market by reducing demand for mortgage loans. Although the rate was lowered to 18%, it remains high enough to impact borrowing.
The economic challenges faced by Russia, such as sanctions and a general slowdown in economic growth, have also reduced consumer and corporate confidence in borrowing and investing in real estate. Simplifying regulations in the real estate sector could help developers launch projects more quickly if interest rates decrease.
The information in this article was reported by Kommersant at the end of July 2025. It's clear that the Russian real estate market is facing significant challenges, and it will be interesting to see how these factors evolve in the coming months.
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- Given the current economic challenges and high interest rates, many individuals might be cautious about investing in businesses that rely heavily on finance, such as real-estate development.
- Due to the slowdown in mortgage lending and the increased finance rates, some potential real-estate investors might consider alternative methods of investing, like stocks or bonds, to avoid the high costs associated with buying properties.
