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Russia hikes interest rates to 15% as inflation soars
(www.bbc.com)
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this post was submitted on 27 Oct 2023
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Holy crap, 7.5% in (basically) 1 quarter. Imagine trying to buy a house and having your loan repayment amount jumping faster than you can get paperwork filed.
So your comment made me go "lol, imagine buying a house in Russia." Meaning my preconceptions were that most in Russia didn't have the means to own a home.
But then I'm like, I don't actually know that, let's check it out.
According to this site home ownership in Russia is over 90%. So what you outlined is a real problem for people there, and changes some of my mental picture of Russian life.
The more you know!
I suppose 30 years of mostly declining population has probably significantly reduced the pressure on the housing supply
I still have question how even stagnated population would even pressure housing supply at all.
I was wondering the same thing for Germany, our population is stagnating, but apparently we need 400,000 new apartments per year (according to our government). Maybe because there are more divorces and singles nowadays who want to live alone?
Germany's population has actually increased by almost four million in the past ten years, so that number of new apartments seems pretty reasonable at the moment. There will always be some homes that need replaced each year too, if they become unsuitable for living or are converted to non-residential purposes
You are right, maybe the y-axis of the diagram I remember was scaled for a larger range and it looked like it was stagnating, but with those numbers it really seems reasonable.
The numbers for Germany do often look weird after reuinification. In 2011 Germany realised it actually had 1.5 million fewer people than it thought it did. It hadn't actually done a full census since reunification, and over 24 years in the west and 30 years in the east plus the difficulty of combining the two sets of records, errors built up
Yep. If more people were shaking up together. It would reduce the pressure on housing. Though I would suspect that people owning multiple houses might also have an impact on this number.
It's complicated by the fact a lot of flats were privatized after the fall of USSR. It's like a boomer situation in the US. Many still live in what their parents claimed.
90% sounds really high? At least compared to the states where it seems a vast majority is renting??
No idea the data on this, just going off my anecdotal experience.
Everything was owned by the state during Soviet times. Then the people got the chance to privatise their homes for pennies. Now everyone is an owner. That happened to all countries which were a part of USSR, not just Russia. Renting is a very weird concept over there. You only rent if: you travel a lot for work, you're a poor student in a different city and your uni didn't provide accommodation, or you're an alcoholic who lost their home.
Source: born and raised in USSR.
90% own houses, but evidently a much lower percentage also own a washing machine, judging from the souvenirs the conscripts have been bringing home
🤦🏻♂️
I was surprised as well. It would be worth confirming the dates from a second source, but there are some ready possible explanations for it as well. It could show a large number of multigenerational households. It could relate to the distribution of the population in high and low cost areas (rural vs urban likely). So it does seem high, but not impossible.
Cheers!
Another large factor is that it was communism up until relatively recently. Meaning wealth was largely evenly distributed outside the very top of the party. Not that people were well off, but far more equal than we are in the west. And while the oligarchs have an extremely outsized percentage of all Russian wealth buying real estate would make little sense in Russia, that would 1) put their position in Russia in danger by painting a target on them 2) a horrible hedge given Russia isn't the most stable economy. In total I think 90% sounds extremely reasonable. Though the average house standard is of course far lower than say Germany.
That seems reasonable. I also think it stems from my idea of ownership being a standalone house, and didn't include things like owned apartments, flats, condos, etc that would make up a large state of ownership in big cities.
Hold on, 90%? I guess that would include the whole family in the home as the home owners, because otherwise that is an insane amount of single occupant dwellings.
This number aligns with my personal experience
If home ownership is 90% that doesn’t sound like a big problem for the country. If only 10% are renting or looking I can’t imagine that would have much of an impact on prices with demand being so low. Business investment is a problem for sure
People have children and need to get a bigger place. Or their children grow up and move out, so they downsize.
Higher interest rates keep people in places that don't fit them because it's more expensive to change.
I have no clue but that’s only true for a growing population. Last time I checked they have a diminishing population with not that much immigration. So if every time someone dies they leave the house to their child - no money required. Again all assumptions
Uh ok. Yeah that will work... in thirty years. Most people don't have someone dying and leaving them a house every few years.
It’s net housing, plenty of young people going off to die won’t be needing a house, lots of empty houses from people leaving the country through brain drain. Lots of people dying well before their kids grow up requiring a house. Yes some young people will need homes but there’s more than enough supply to keep the price low enough that the interest rate doesn’t bite as hard as interest on a large principle plus this impacts less than 10% of the population then assume many of the 10% is happy to rent so I don’t know ~ 5% of the population might want to buy a house and some of this 5% would have the means to do so even with higher rates so it’s even less again
You don't understand. With high interest rates, no one wants to move because their home mortgage will be higher even on a smaller place.
You don’t understand. If you own your home why do you need to move? And if you do need to downsize how will higher rates increase the burden if the principle is decreasing? Do you have a degree in macro economics? Because I dont
I just explained it to you:
Yes, higher rates will increase your payment even if the principal is lower.
A $300K 30 year mortgage (paying 20% down) at 3.25% costs $1044 per month. The same mortgage at 6.25% costs $1477 per month. 15% is $3034 per month. At 15% you can afford half as much house as at 6.25%, and a third as much as 3.25%
https://www.bankrate.com/mortgages/mortgage-calculator/
Also, you will get less equity for your house when you sell because other people can't afford a larger loan (because their payments go up too). That's the purpose of high interest rates; they prevent people from borrowing money.
It's not that I didn't think anyone had the means, but that there would be a lower percent than they have due to wealth inequality. And yes, we are a product of our environment, and much of the western media covers the bad behavior of oligarchs. I don't routinely get exposed to contemporary slice of life vignettes of other countries.
Lastly, when you try and shame others for showing that they learn, challenge the internal biases that we all have, and change their own opinions, you only serve to show others the calcified state of your own perceptions.
Offtopic (because it has nothing to do with Russia): in Argentina the inflation of the local currency this year reached at least 100% annual.
But people there use USD fiat for purchasing real estate. And use USD/EUR for saving.
So even if the local currency is a mess, people moves using foreign currency for important transactions.
The Bank of Russia (back when things were so bad they had to halt their stock market) has also forbid people for using more than small amounts of foreign currency. I believe people are limited to the equivalent of 10,000 rubles, or $100 per week.
American moment
I mean you would be really dumb for having a variable rate loan.
I wasn't talking about variable rate loans. I mean by the time you started the process of getting the loan there'd be one interest rate and one expected repayment amount; and by the time you got to signing and locking in the rate it would probably have gone up by about a point and half at that rate.
Oh yeah for sure. Gotcha. Yeah I bought a house a year ago, and the rate was 5.5% when I started looking. Went up to 6% by the time I found the house and locked it in. That half percent actually represented a lot of money.