Financial analyst Rasul Rysmambetov believes that the proposal to issue mortgages without a down payment carries serious risks for the economy, as well as for the government and the National Bank's plans. In his opinion, it is primarily dangerous for ordinary citizens.
As reported by Rysmambetov on his Facebook page, a petition has been launched in Kazakhstan calling for mortgages to be issued without a down payment. According to the petition's authors, removing the initial payment would make the process of buying a home accessible to a wide range of people. They also believe it would have a positive impact on the country's economy.
The expert, however, argues that the main beneficiaries of this situation would be developers.
"After a series of scandals in the construction industry, the property market has quietened down somewhat. In Almaty, houses built without permission or with violations are even being demolished. To be honest, if you checked all the developments above Al-Farabi Avenue in Almaty, violations would likely be found in half, if not the majority, of them.", he stated.
Rysmambetov suggests that developers have put forward the initiative to zero out the mortgage down payment in order to expand the market.
"Potential mortgage holders will not be beneficiaries of this initiative, and here's why. The unfortunate experience of withdrawing pension savings led to a significant increase in property prices – by 50% or more – even though it was supposedly meant to support socially vulnerable segments of the population (SVSP). Such a rise in prices killed any hope for the SVSP to buy a flat – whether with a mortgage or by saving up. The withdrawal of pension assets and the subsequent increase in property prices led to a significant wealth gap and worsened the situation for the SVSP, as rental prices also rose.", the statement reads.
According to the financial analyst, if the down payment is removed, demand for property could increase five to tenfold. This, in turn, would lead to a doubling of apartment prices, and "in the race to capitalise on the market moment, the quality of housing would fall below even the current level."
"After 1-1.5 years of living under constant financial stress, nearly half of all mortgage holders would drop out of the race. There is a high probability that they would try to solve their financial problems through protests and demands for the state to write off debts. After all, no one is going to go to developers demanding they lower property prices.", Rysmambetov declared.
In conclusion, the expert proposed several alternative solutions:
- accelerate the introduction of transparent reporting for companies of public interest (if they receive state money – directly or indirectly), meaning including construction companies that receive public funds;
- actually launch factories for building materials, sanitary ware, and other items. Then, introduce non-tariff restrictions within the EAEU on imports three years after the factories become operational;
- conduct an analysis of pricing for housing, building materials, and land – permanently close major cities to government mortgages and develop the regions. Otherwise, in 10 years, half the population will be living in Astana, Almaty, and Shymkent;
- reduce state mortgages after launching our own factories, limiting them to the SVSP. Thought must be given to developing the economy, rather than how to funnel the budget into a narrow circle of beneficiaries.