Russian Housing Prices and Introduction of Mortgage Financing

In this paper, using a panel data (quarterly) on a sample of 80 regions of the Russian Federation during a period of second quarter of 2006 to the fourth quarter of 2015 the influence of the introduction of the removal of restrictions on the mortgage financing in Russia on the real estate prices in the different segment (overall, typical, elite and improved) on both primary and secondary market was examined. This was an example of credit constraints removal which exogenously increased the mortgage supply by decreasing in banks risks (through the right to forfeiture the mortgaged apartments in case of debtor’s default). The fixed effects model with standard errors adjusted to the presence of heteroscedasticity and autocorrelation was employed to capture its effect. Then the IV regression was applied. The hypothesis that the removal of credit constraints increased the availability and supply of housing which led to the greater demand for housing was tested. Also, is the hypothesis that the «Housing Package» lead in to even higher increase in prices through the positive change in expectations about future increase in mortgage lending and increased future demand for housing was also tested Finally, the real estate prices in Russia such as Income per capita per capita had significant positive impact net migration and natural growth of population were found statistically significant in all the segments. The exchange rate and the unemployment negatively affected the prices.