Central Bank: Tighter lending narrows gap between market and true housing prices

This is evidenced by a decline in the gap between market and fundamental ("fair") housing prices. In the first quarter of 2024, the gap approached 20%, but by the end of the year it had fallen below 15%, with the annual average at around 17%.

After a sharp increase in the first quarter and slight growth in the second, the average market price per square meter remained largely stable. Meanwhile, the fundamental value of housing continued to rise.

A key factor behind the narrowing gap was the “optimization of homebuying capacity” triggered by tighter mortgage lending conditions. Banks raised interest rates and shortened loan terms, leading to higher servicing costs.

For example:

• The average mortgage interest rate rose to 19.8% (+0.5%), and reached 20% in the second quarter.
• The average mortgage term fell by more than six months to 16.6 years.
• The average loan amount increased to 291 million UZS.
• The average monthly mortgage payment surged by 44%.

As a result, despite a 17% increase in nominal wages, the housing affordability index dropped by 27%.

Due to the reduction in new mortgage issuance, real estate market activity declined. In 2024, 329,000 property sale contracts were registered — 2.2% less than in 2023.

At the same time, the volume of available housing on the market increased, contributing to a decline in the housing price index in UZS during the second half of the year. The foreign currency price index also decreased starting from Q2, ending the year 1.7% lower than at the beginning.

As of the end of 2024, mortgage loans made up 13% of the total loan portfolio of banks and 19% relative to Tier 1 capital. While some banks showed capital deficiencies relative to outstanding mortgage debt, systemically important banks maintained above-average ratios, mitigating systemic risk.