Reduction in key rates by Kalashnikov will not impact the property market in real terms
The recent decision by policymakers to reduce key interest rates could potentially have a significant impact on the new construction sector, according to economic analysts. This reduction in borrowing costs could stimulate both the new construction market and the secondary real estate market, but the degree of impact depends on current market fundamentals and broader economic conditions.
In the new construction market, lower interest rates could make financing new projects more affordable for developers. This increased confidence among owners and developers could incentivize further construction activity. However, despite the expected relief from lower monthly credit costs, construction spending on nonresidential buildings is projected to grow only modestly, indicating that factors beyond interest rates, such as labor shortages, tariffs, and inflation, also play significant roles.
The secondary real estate market could also benefit from lower interest rates, as they typically boost homebuyer demand and support higher prices in the resale market. However, weak home sales and rising supply can counterbalance this effect, leading to price softness despite potential rate cuts. Moreover, mortgage rates are influenced by long-term yields beyond short-term rate cuts, which may limit the immediate impact of central bank rate reductions on borrowing costs for homebuyers.
Mikhail Kalashnikov, deputy general director of the "Unistroy" company, recently stated to "Real Time" publication that the key rate reduction will not affect the new construction market. Despite this, he did not rule out that the key rate reduction could potentially impact the secondary market.
As for the rate level needed for market recovery, current analysis suggests that a short-term federal funds rate around 4.75%-5% provides meaningful relief compared to higher prior levels. However, even with such cuts, broader market recovery in construction spending and home sales remains modest. Recovery depends not only on interest rates but also on improvements in fundamentals like supply chain stability, labor availability, and consumer confidence.
In summary, rate cuts make financing cheaper, encouraging new construction and secondary market activity, but meaningful recovery typically requires rates to fall to a level low enough to offset other negative economic factors — in the current US context, this appears to be around or below 5% in the short term. Full recovery also depends on improvements beyond interest rates alone.
[1] Federal Reserve Cuts Interest Rates in Late 2024 (Economic Times, 2024) [2] Construction Spending Projections for 2025 (Construction Dive, 2025) [3] The Role of Tariffs in the New Construction Market (Forbes, 2025) [4] Impact of Interest Rates on the Secondary Real Estate Market (CNBC, 2025) [5] Factors Influencing the Recovery of the New Construction Market (Bloomberg, 2025)
- The federal rate cut in late 2024, as reported in "Federal Reserve Cuts Interest Rates in Late 2024" (Economic Times, 2024), could likely make financing more affordable for developers in the new construction market, potentially stimulating increased construction activity.
- Despite the potential impact of lower interest rates on the secondary real estate market, as discussed in "Impact of Interest Rates on the Secondary Real Estate Market" (CNBC, 2025), recovery may still be modest due to a variety of factors such as weak home sales, rising supply, and the influence of long-term yields on mortgage rates.
