As Russian real estate booms, central bank warns of bubble risks

* Housing prices in Russia booming amid weaker rouble

* Low deposit rates also driving prices

* Mortgages surge thanks to state-backed subsidy programme

* Central bank warns of bubble risks

* Regulator wants to end state-support in mid-2021 as planned

By Tatiana Voronova

MOSCOW, Nov 27 (Reuters) - Russia's real estate market is booming, fuelled by record-low interest rates and a state-subsidised mortgage programme, prompting the central bank to consider ending a COVID-19 support measure to prevent a housing bubble, data show and analysts say.

Demand for different housing options surged as lockdowns were imposed during the spring, while a weak rouble has added to production costs, all combining to push prices up.

And with deposit rates at record lows, Russians turned to property as an investment opportunity. Banks issued 2.7 trillion roubles ($35.7 billion) worth of mortgage loans in the first nine months of this year, a 37.6% increase on the same period of 2019, according to the central bank.

Mortgage subsidies were introduced to inject some life into Russia's struggling economy, dealt the double blow of a global pandemic and an oil price crash. That sent the rouble to four-year lows and led the central bank to slash rates to a record low 4.25%, but the country's biggest developers have found a way to turn a profit.

All major housing developers -- PIK, LSR and Etalon -- have reported sales growth this year. VTB Capital analysts estimate the mass market players are best placed to benefit and have already been able to increase prices 17% in annual terms.

"Against the backdrop of falling deposit rates, investments in real estate have become attractive once again," said Moody's analyst Mikhail Shipilov. "You could say demand for real estate on the primary market is booming."

MOSCOW BUBBLE

Subsidising mortgages has given more borrowers access to funds, but also pushed prices up, especially in Moscow and the surrounding region, by around 16%, Olga Polyakova, a deputy chairwoman of Russia's central bank, said this week.

"This is quite significant and it almost negates the benefit we derived from subsidising mortgages."

The price growth is just an adaption to cost increases in building materials caused by the weakening rouble, according to Vladislav Preobrazhensky, executive director of the Moscow investors club.

Finance Minister Anton Siluanov has said the state-backed mortgage programme could be extended beyond July 1, 2021, a move his ministry estimated would allow for an additional 354,000 loans worth 1.1 trillion roubles.

Ksenia Yudaeva, the central bank's first deputy governor, this week called for the programme to end by July 1, 2021 as planned, to prevent a bubble, as real estate price growth has far exceeded the inflation target of 4%.

Moody's Shipilov said there is potential for 5% to 6% more price growth until mid-2021 before demand is exhausted. ($1 = 75.6895 roubles) (Reporting by Tatiana Voronova; writing by Alexander Marrow; editing by Katya Golubkova, Larry King)