Kazakhstan’s real estate market in danger of collapse

business and economy

Kazakhstan’s real estate market in danger of collapse

By SRI ⋅ July 16, 2008 ⋅

(SRI) - The real estate market in Kazakhstan is in danger of a collapse as unemployment grows and inflation reduces the purchasing power of the population, said Gulnar Rakhmatullina, an analyst at the Kazakh President’s Institute of Strategic Research (KISR) in an interview with Interfax.

The conditions are already forcing people to default on their mortgages, and some analysts believe that soon a large part of the population may become unable to meet their mortgage payments.

Rakhmatullina suggested that the Kazakh Mortgage Company (KMC) buy up the properties repossessed by the banks and keep them out of the market until the prices on the housing market stabilize. That might help prevent collapse of the real estate market, she believes.

Last week, a number of borrowers appealed to the government to repay part of their mortgage loans for them and impose a moratorium on repayment of those loans to the issuing banks.

Rakhmatullina rejects these demands as they could further exacerbate the problems on the financial markets in Kazakhstan. However, she believes that the government should step in and help reduce the interest rates on the mortgage loans.

Rakhmatullina warns of seeing the worsening situation on the real estate market in isolation. “The crisis on the mortgage market in Kazakhstan should not be viewed separately from the economic situation in the republic. In order to resolve the problems of the mortgage market measures aimed at stimulating the whole economy have also to be taken.”

She believes that tax benefits for small- and medium-sized businesses would be most efficient measure to raise the income of the population and stabilize the situation on the mortgage market.

Analysts believe that there are about 100 thousand properties in Kazakhstan that are facing an imminent default. If these properties are put up for sale all at once, the real estate market could collapse together with the whole national economy, Interfax reported.