It’s been several days since all the TV channels laud the program on “Apartments to young families” during all the news casts and other kind of outlets.
As a matter of fact the campaign reached its goal. People have become more interested by thinking that the government is doing something good for them. For the sake of justice, let us mention that although the program will relieve the problems of only a few it is still a positive thing and is better than nothing. Now let us simply why this program is not relevant to the noise raised around it.
1. Limited number of beneficiaries
Thus, the state allotted 3 billion AMD for the program, a part of which will be directed to re-financing of 300 loans. Even the government confesses that this is a very small number. For example, Ruben Markosyan, the secretary of the National Youth Policy Council adjacent to the Prime Minister told the journalists that the number of young people in Armenia is 800 thousand and 4-5% of them cannot afford to take mortgage loans because of high interest rates. “5% makes 40000 families. And these families are target groups of the current program,” he said. It turns out that only 300 out of 40000 have the chance to benefit from the program. And this is each 133rd young person. As they say, the competition is going to be tough. It is also noteworthy that only 4-5% of the ones, who need mortgage loans, mentioned that the issue is connected with interest rates. In our opinion it is no quite so. And if it’s really so then the rest of 95% have other obstacles with taking loans, such as down-payment and insufficiency of incomes. And these are the next two weak points of the program.
2. Down-payment
The program stipulates that the price of the purchasable apartment in Yerevan shouldn’t exceed 16 million AMD and in the marzes the price shouldn’t exceed 10 million AMD. And the families that wish to purchase an apartment should make a 30% down-payment of the price. It is hard to find even a two-story apartment in Yerevan at 16 million AMD. Even if found, the 16 million AMD worth apartment as a rule is going to require serious renovation. So this can be considered a minimum amount of money for purchasing a house. It means that the young couple should have 4 million 8 hundred thousand AMD at hand to buy an apartment in Yerevan and 3 million AMD to buy one in marzes. This is a pretty serious amount of money for Armenian young people, the average monthly income of whose is 100 thousand AMD. It means the down-payment is the main obstacle for getting money. Many developed countries help the young families with down-payments. They either fully or partially subsidize the down-payment. Besides that, in developed country, which our government likes to bring up as examples, nobody defines a 30% down-payment. In our case the state won’t subsidize the down-payment but this option has been originally discussed as well.
3. Incomes
Regardless of whether the funds are from the bank or are refinanced by a concrete program (KfW, National Mortgage Company or others) in order to receive a mortgage loan), the debtor should have three times more salary than its month income. Let us do a little calculation. If the young man decides to buy an apartment worth of 16 million AMD then he can receive maximum 70% of this amount as loan from the bank, which is 11 million AMD. By participating in the program the young man may receive the loan at 8.5% annual interest rate. The websites of all the banks post credit calculators. With those calculators it is possible to calculate how much the debtor will have to pay every month. If you are not in front of a computer let us say that for example the payback will amount to 136 thousand AMD every month of the same amount is paid evenly every month. This means that the annual income of the young people should be no less than 400 thousand AMD. We’d like to tell the supporters of the program that their parents or relatives may also show their incomes as a helping aspect to get the loans. By doing this they become co-debtors. The problem, however, is that the incomes should be documented and we know that in Armenia the majority of people make more salary than what’s showed on paper. Indeed, this is not good and is done to relieve the social security payments. But this is the reality. Only employees of international organizations receive high documented wages. The salaries of budgetary employees are so low that those are not enough even to get a refrigerator. How much can the overall income of pedagogue-family be? Or what can the parentless children do if they don’t have side incomes? Or what can the villagers do? And the banks in their turn demand too many papers. They make the potential debtors suffer a lot, by trying chasing all types of documents. Not to mention the possibility that if they find a bad credit history (when purchasing a phone or something else) then the debtors should forger about their vague prospect of having an apartment.
4. Light help
In fact the program will relieve the burden of young people in terms of monthly payment. Are you interested to what extent? We have already mentioned that in the case of taking loan at 8.5% interest rate (11 million AMD with a 10-year acquittal period) the young family should monthly pay 136 thousand AMD. Currently in the banking service market it is possible to get credit with 12% interest rate. In this case the monthly payment makes 158 thousand AMD. It means that the state supports the young person with 22.000 AMD every month. And this help is provided to only 300 “selected ones.” It turns out that our government will support the young people with only 6 million 6 hundred thousand AMD every month. Indeed they are speaking of 3 billion AMD but so far the mentioned amount is worth a middle class foreign vehicle. Or in the annual term is makes 80 million AMD (which is money that is spent on one elite wedding). Therefore, the opinions that this is another PR action to raise the image of the President and to show that the latter keeps his pre-election promises are not far from reality. There are also opinions that even if the government realizes this program it is done to activate the sellout of the apartments they have built. Nevertheless, regardless of whose interests this project serves, it is not a bad idea. As a whole, the young person, who wants to get an apartment doesn’t much care of this program. But we think that it’s a little exaggerated to advertise and glorify this project, which is worth of 20.000 USD a month. It is exaggerated at least by 70%.