Increase in interest rates leads to a slowdown in Russia's housing market, according to an expert's proposition. A reduction in interest rates could potentially stimulate a recovery in the real estate sector of Russia, as suggested.
The residential real estate market in Russia is set to see an increase in buyer activity, thanks to a recent key rate reduction by the Bank of Russia, according to Arthur Akhmetov, an expert from the "Avito Real Estate" platform.
On July 25, 2025, the Bank of Russia set the key rate at 18%, a decrease of 200 basis points from its previous level. This reduction creates new opportunities for developers and buyers, as mortgage rates are expected to follow suit.
Currently, mortgage rates in Russia exceed 25%, a level that has significantly dampened buyer activity. However, with the key rate now at 18%, it is anticipated that mortgage rates will gradually decrease, though not immediately to historically low levels. Some banks are planning to lower mortgage rates by 2 percentage points, and even below 20% for those with an initial deposit of 50%.
This decrease in mortgage rates could bring back clients who previously abandoned deals due to high rates. The expert emphasizes that the number of deals could increase even during the traditionally "weak" summer season.
The increase in demand may later affect price dynamics in the residential real estate market. However, an increase in buyer activity is expected within existing projects on the primary market, although significant price changes are not yet forecast.
Developers, with access to cheaper borrowing, are likely to develop new mortgage products with more favorable terms. These new mortgage products will be particularly relevant for buyers outside existing subsidized programs.
It is expected that most credit organizations will update their mortgage offers within two weeks. Further developments will depend on monetary policy, bank offers, and market participants' activity in the segments of market and subsidized mortgages.
Further cheapening of credits and strengthening of government support programs could lead to increased demand. However, there is no indication from the search results that new major subsidized mortgage initiatives will be introduced to coincide with the rate cut.
The market situation has changed since last year, as high rates are now accompanied by a perceived positive signal for demand recovery. Over the past three months, the average mortgage rate has fallen from 29% to 21%.
Despite the end of the subsidized mortgage program in mid-2024 and mortgage rates remaining above 25%, housing prices in Russia rose by 6-9% nationwide and over 12% in Moscow in early 2025 while demand declined 20-50% in many regions. The market demonstrated resilience, but buyer activity remains subdued, especially in regional markets where supply increased significantly.
In conclusion, the Bank of Russia’s July 2025 rate reduction is projected to cautiously improve mortgage affordability and buyer activity, stabilizing the real estate market especially as inflation continues to decline in 2025-2026. However, a major market shift or mortgage boom is not expected in the near term given tight monetary policy and economic conditions.
Financially, the decrease in the key rate by the Bank of Russia on July 25, 2025, to 18% could lead to a reduction in mortgage rates, offering more affordable housing options for potential buyers.
Developers, with access to cheaper borrowing due to the key rate decrease, are likely to develop new mortgage products with more favorable terms, which might attract more buyers to the residential real estate market.
