Chairman of the Central Bank of Uzbekistan, Mamarizo Nurmuratov, discussed the regulatory measures being taken to mitigate the consequences of a "price bubble" in the real estate market in Tashkent, Gazeta.uz has reported.
The term "price bubble" refers to an extended period of overvaluation of properties, where prices are not in line with the real income of the population and rental rates, along with excessive mortgage lending.
The Central Bank explained that the "bubble" is expanding because people expect further price increases in housing, leading to even higher demand. This, in turn, attracts investors seeking profit, irrespective of fundamental factors.
In the first quarter of 2020, the difference between the fundamental and market prices was minimal due to quarantine restrictions during the pandemic. However, from the second half of 2020, the gap started to widen, linked to changes in the mortgage program and lifting restrictions for property purchase in Tashkent.
Delayed demand for housing due to the pandemic and favorable mortgage programs with subsidies contributed to the difference between the fundamental and market prices reaching $10,000
In 2022, an influx of foreign citizens into Uzbekistan, particularly from Russia amid the Russian-Ukrainian war, increased demand. Record growth in international remittances and the continuance of mortgage rates at 13% until the end of 2022 also played a role.
The difference between the fundamental and market prices in the first quarter of 2020 was the lowest since 2018-2022 due to quarantine restrictions associated with the coronavirus pandemic.
In 2021, the volume of mortgage resources allocated by the government to banks increased by 1.5 times to $1,2 mn. Additionally, inflation reached 12.3%, and construction costs rose by 11.8%. All these factors resulted in the difference between the values reaching $18,000 by the end of last year, 1.6 times higher than in 2021.
The Central Bank stated that these situations indicate that factors other than population income influence the rise in housing prices in Tashkent.
The regulator anticipated that the gap might widen further considering the plans to impose a moratorium on construction in Tashkent until the city's master plan is approved. The president mentioned this on February 8, but the moratorium has not been declared yet.
During a press conference on July 27, Chairman Mamarizo Nurmuratov mentioned that the maximum limit for mortgage credit is set at $37,000 which reduces the risk of a "bubble." The aim is to prevent negative impacts on banks when the "bubble" bursts. Hence, even if a house costs $85,000 the mortgage loan provided by a bank in Tashkent will not exceed $37,000, mitigating the risk.
New analytical data on property market pricing in Tashkent is expected to be published in September, according to the head of the Central Bank.
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