Photo: Freedom Holding Corp.
Kazakhstan’s mortgage market is likely to continue shrinking, as the cost of mortgage loans rises and becomes too high for banks, according to Freedom Holding Corp. CEO and majority shareholder Timur Turlov. He made the statement yesterday during a meeting with journalists in Almaty.
No mortgage lending outside state programs
As Turlov noted, over the past several years, the mortgage market has been sustained almost entirely by various government programs.
«In recent years, mortgage lending in our country has been driven by state support programs. At the moment, I don’t see any large-scale reduction in these programs compared to last year. Frankly speaking, I don’t expect any significant decline in the portfolio,» he said, adding that the share of mortgages issued by commercial banks continues to decrease.
«Mortgage lending by second-tier banks has been declining every year,» the businessman stated.
Public funds are the key to Otbasy Bank’s success
According to Turlov, Otbasy Bank is the primary recipient of public funds in the country and therefore plays a central role in the mortgage market.
«Otbasy’s role is growing alongside the volume of public funds that are allocated exclusively to it. It simply cannot be otherwise,» he emphasized.
At the same time, Turlov believes that commercial banks would be fully capable of implementing state mortgage programs if they were allowed to do so.
«Our second-tier banks are quite effective at issuing mortgages and certainly deserve equal terms. We could make this process even faster and more convenient for clients, without any additional costs,» he said.
The cost of market mortgages reaches 20%
According to Turlov, market-based mortgage loans are becoming excessively expensive for banks as their cost continues to rise.
«Mortgage costs are actively approaching the cap that the Agency for Regulation and Development of the Financial Market of Kazakhstan wanted to introduce on the maximum mortgage rate. If I’m not mistaken, the figure discussed was 20%. In reality, the cost of mortgages for many banks has already exceeded that level,» he noted.
Turlov explained that market mortgages are currently issued only as short-term loans lasting several months or in partnership with developers, who subsidize part of the interest rate.
Market mortgages to decline further next year
With a base rate of 18% and no expansion of state programs, the mortgage market will continue to contract, the CEO of Freedom Holding believes.
«Next year, with a base rate of 18%, we will see a further reduction in market mortgage programs,» he said.
At the same time, Turlov does not expect this trend to have a noticeable impact on housing prices.
«There is almost no market-based mortgage lending at the moment. It may decline even further, but it is unlikely to have a significant effect on prices,» he concluded.
Freedom Holding Corp. is a leading brokerage and investment holding company in Central Asia and Eastern Europe, led by CEO and majority shareholder Timur Turlov.
In Kazakhstan, Freedom Holding Corp. provides brokerage services under the brands Freedom Broker (Freedom Finance JSC, a KASE member) and Freedom Finance Global (an AIX member). Other subsidiaries operating in the country include Freedom Bank, Freedom Insurance and Freedom Life.
