Use of Mortgage-Investment Analysis to Study the Behavior of the Population in the Residential Real Estate Market in the City of Kazan

  • Nail M. Gabdullin
  • Igor A Kirshin
  • Linar G Ibragimov
Keywords: Rent, Mortgage, Internal Rate of Return, Cash Flows, Forecasting

Abstract

The study considers the issues of making a decision on
investing in residential real estate. The investment
efficiency was assessed using and without using
borrowed funds at different rates of rent growth. In the
course of the mortgage market research, the
preponderance of the offer of loans with an annuity
repayment method was found.
The necessity of using discounting instead of
capitalization in mortgage-investment analysis is
substantiated. This is due to instability in the cash
flows of owners. There may be cases of negative cash
flows during the initial stages of investing in real estate
with mortgage lending, which are covered by the net
cash flow of subsequent stages. It is proved that the
expectation by the population of a high level of
inflation in the real estate rental market, which
influences the price of real estate, facilitates the
implementation of real estate transactions.
However, the investment evaluation model based on
the capitalization formula does not allow this decision
to explain, since it assumes the stability of cash flows
in time.
Debt and equity are considered as sources of capital
formation when investing. The practical importance of
this study is represented by the analysis of the
effectiveness of differentiated and annuity methods for
repayment of a loan which are used by the leading
subjects of mortgage lending: JSC Gazprombank and
PJSC Sberbank.
In the course of the study, a detailed analysis of the
dynamics of rental price growth and prices of real
estate objects was made using the example of a oneroom
apartment for 2009-2017. On the basis of the
analysis, the interrelation of price dynamics is
revealed, the feature of which is the existence of an
annual lag between the growth of rental prices and the
growth of prices for residential real estate.

Published
2017-12-31