Proportion of overdue payments on mortgage loans in Kazakhstan at the lowest level since late 2009More information on this topic is presented in the PMR report:
- September 2015
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- Pages: 163
- Forecasts: 2016-2021
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Construction industry output increased by 4.6% in real terms to KZT 2,667bn (€11.2bn) in 2014. In recent years, the construction industry in Kazakhstan has been fuelled overwhelmingly by new construction projects, whereas initiatives involving extensive modernisation and repair have diminished in value.
The share of new construction as a proportion of total output rose from 82.3% in 2012 to 85.1% last year, and the proportion is likely to be increased to around 86% in 2015. Until 2015, new construction projects had increasingly been rolled out by private Kazakh companies, whereas there had been a reduction in the exposure of foreign and state-owned companies. In 2015 the market share of foreign contractors is very likely to begin to rise again, as the total value of construction output generated by foreign contractors in the first half of the year rose by more than 82% in year-on-year comparison.
Last year, Kazakh private companies accounted for 84.4% of all construction output in the country, and were followed by foreign entities, which accounted for 14.9%. State-owned enterprises accounted for an insignificant 0.7% of total output. During the first half of 2015, the breakdown changed notably. Private Kazakh firms were responsible for 77.3% of national construction output between January and June, worth KZT 937bn (€4.5bn) in total, whereas foreign companies saw their market share up to 22.1%.
In recent years, the most dynamic construction activity has been observed in the residential sector. The total floor area of residential properties activated in Kazakhstan in 2014 came to 7.5 million m², which is 9.8% more than that of 2013, standing for the record annual housing completion result recorded in Kazakhstan in more than two decades. The uptrend in housing space completion is very likely to continue in 2015, as 24% more space was activated across the country in the first half of the year than in H1 2014.
In Kazakhstan, demand for housing has accelerated in recent quarters, mostly because local banks have considerably increased mortgage-lending. The number of property sales increased by 8.0% year on year in January-July 2015, to 93,122. A positive rate of growth was recorded in all but six administrative regions, with the most substantial increase being in the number of transactions recorded in Astana (+69.1%), followed by the Mangistau Province (+45.1%) and the Akmola Province (+28.1%). In the city of Almaty and Almaty Province, there were increases of 6.2% and 5.1%, respectively.
Kazakh banks are becoming more open to speeding up lending on improving loan portfolios. The share of overdue loans as a proportion of the total outstanding loans in Kazakhstan stood at 19.1% in June 2013, and the same proportion was noted in June 2014, but by June 2015 it had eased to 9%. The situation in construction is only slightly worse, with overdue loans accounting for 11.3% of the total value of the outstanding debts of construction companies in June 2015, in comparison with 37.2% in June 2013 and 33% in mid-2014.
In H1 2015, the total value of loans granted by banks to construction companies reached KZT 268.4bn (€1.3bn), a 12.5% year-on-year decline. Nevertheless, the total amount of mortgages granted by banks in the first half of 2015 reached KZT 115.5bn (€558m), a 20.3% year-on-year nominal increase. Moreover, there was a 5.1% year-on-year increase in construction output for the period January-June 2015 in real terms. The nominal decline in lending to construction companies in the first half of 2015 was largely caused by the change in the currency exchange rate. The value of bank loans granted to construction companies in H1 2015 came to about €1.29bn, whereas €1.26bn was granted in the corresponding period a year earlier.
In 2014 the average mortgage rate on issued loans reached 10.9% for KZT denominated loans (as opposed to 11.5% for 2013) and also 10.9% for those granted in a foreign currency (as opposed to 12.7% for 2013). However, the number of mortgages granted in foreign currencies is negligible. In 2014 this category of loans accounted for only 1.7% of the total value of mortgages granted in Kazakhstan, in comparison with 2.2% in 2013 and 5.9% in 2011.
The Kazakh mortgage market is still not near the level reached in 2007, when the total value of new mortgages granted to aspiring homeowners reached KZT 417.5bn (€2.5bn). The record level achieved in 2007 is unlikely to be bettered in the near future, given the reticence of local banks to markedly speed up mortgage lending. Until mid-2014 the share of bad mortgage loans had increased markedly, forcing banks to tighten their lending standards. Although the Kazakh economy increased by 6% in 2013 and continued to display encouraging pace in the first half of the year, along with the fact that the CPI fell to 6.1% in H1 2014, from 6.5% a year earlier, which should typically fuel mortgage lending, the total value of such loans granted to the population in the first half of 2014 was still only 1.5% more in nominal comparison than that of H1 2013.
Nevertheless, since mid-2014 the proportion accounted for by overdue payments has been constantly falling as well. In June 2015 it accounted for only 7.9% of the total value of outstanding mortgages in Kazakhstan, a 3.9 p.p. reduction over the past twelve months. The last occasion on which a lower proportion was seen was November 2009.
More information on this topic is presented in the PMR report:
Construction sector in Kazakhstan 2015. Development forecasts for 2015-2021