Prices in the primary real estate market increased by 7% and overtook inflation for the first time since 2016. For 9 months of this year, prices in Kazakhstan added 7% after rising by 5.4% in 2018 and 2.4% in 2017. However, this growth was mainly driven by the state-subsidized mortgages, which increased the demand for the residential real estate, and had a pronounced regional character. Demographic growth and urbanization also contribute to increased demand for housing. The positive dynamics of an increase of the population by more than 1% per year is accompanied by a gradual increase in the share of the urban population, primarily due to the largest cities. As a result, the level of urbanization in Kazakhstan exceeded 58%.
The growth in the number of transactions in the housing market accelerated due to the secondary market and increased mortgage lending. For nine months of 2019, the number of real estate transactions increased by 22.5% yoy, which is three times higher than the previous year (the growth in the number of transactions for the 9M2018 amounted to 8.3% yoy). This significant growth was facilitated by the launch of the “Baspana-hit” program, aimed at the highly sought after secondary housing market. The mortgage loan portfolio grew to T1.6 trillion, which corresponds to 26% of the total retail loan portfolio. The lion's share of this growth is accounted for by the mortgage company Baspana and Zhilstroysberbank.
Improvement of housing provision due to large-scale government spending. Thanks to government support measures over the first three quarters, investment in housing construction increased by 20.5% yoy with an overall increase in construction work by more than 13% yoy, making the industry one of the leading drivers of economic growth. Housing affordability has improved dramatically in 2019. This was due to a decrease in the weighted average mortgage rate to a record low of 8%, lengthening of the loan term with a simultaneous substantial increase in salaries (the average salary since the beginning of the year has added more than T20 thousand or 17%), which so far has been mainly due to the public sector. As a result, an average household needs about a third of its income per month to service a mortgage loan, while more than half was required a year earlier.
The prospects for the next year are quite optimistic. In particular, the housing market can be expected to maintain high activity and significant volumes of construction. For the State, housing and infrastructure construction are a priority, while the population has a need to improve housing conditions. Such synergy will help maintain a relative balance of supply and demand – the volume of new construction adjusts to the solvent demand, backed by the Sate support. Therefore, prices in the housing market next year, according to our forecast, will increase by 5-7%.
