Tuesday, February 4 2014 15:58
Expensive mortgage loans curb demand for real estate in Armenia
ArmInfo. Expensive mortgage loans curb demand for real estate in Armenia, Head of the Yerevan Real Estate Exchange Artyom Pribylsky said in an interview to ArmInfo.
He said that the deferred demand for real estate existing in Armenia for the moment can reanimate the country's secondary housing market.
"Most of Armenians today can buy a house only if given a mortgage loan, but unreasonably high interests on such loans make this almost impossible," Pribylsky said.
He said that in Armenia people give over 70% of their earnings to essentials, so, they can't afford mortgage loans if their interests are high. "Local banks would hardly lose money if they reduced their mortgage interests by 4-5% as they would get a lot of new borrowers. But most of them are afraid of risks and give mortgage loans to a very limited number of borrowers. By doing this they cause the market to stagnate," Pribylsky said.
According to the Tariffs and Rates of Armenia's Banks bulletin published by the Agency of Rating Marketing Information (ArmInfo) on a monthly basis, today the average interest on a mortgage loan in Armenia's banking system is 15% (the minimum is 12%, the maximum 19%).
ArmInfo's Financial Rating of Armenia's Commercial Banks bulletin says that as of Jan 1 2014 mortgage lending in Armenia totaled 150bln AMD (12.4% more than on Jan 1 2013). Before the crisis, mortgage lending was very active in Armenia. In 2007 it almost redoubled, but in the following two years the growth dropped to just 3%. After the crisis, mortgage lending began to grow again: in 2010 it grew by 6.1%, in 2011 by 22%, 2012 by 14.3%.
As of late Sept 2013, overdue loans made up 7.2% of all mortgage loans in Armenia's banking system.