Rent Increases Four-Times Rate of Inflation

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Rent Increases Four-Times Rate of Inflation

By Alëx Elliott
Reykjavík with Hallgrímskirkja in the background

Photo: Páll Stefánsson.

The cost of rental housing in Iceland has shot up by over eight percent in the last year.

According to Statistics Iceland, the cost of renting a place to live in Iceland has increased by 8.2 percent in the last 12 months to March – a figure well above the 2.2 percent rate of inflation in the last year. The figures were made by comparing officially notarized rental contracts in March 2014 to equivalent ones made 12 months before.

“Our members are really feeling these increases,” says Jóhann Már Sigurbjörnsson, chairperson of the Icelandic Renters’ Association.

He says the authorities have supported homeowners with special interest relief since 2009, but that renters have been left behind. “If rental prices are going to carry on being this high, the renters will need more support to make ends meet,” Jóhann told Vísir.is.

When the rental contracts are examined by neighborhood and apartment size, it is clear that the rent hikes are not uniform and that rent has even gone down in some areas.

The increase is most on two-room apartments in the Breiðholt district, where the average price in March was 29 percent higher per square meter than a year before.

Two room apartments in Kópavogur have also increased rapidly in price, by about 21 percent between years.

The  per-square-meter price on new rental contracts is highest on studio apartments in Reykjavík, between Kringlumýrarbraut and Reykjanesbraut. In this area the average square meter costs ISK 2,274 (USD 20/EUR 15) per month. The rent to the west of Kringlumýrarbraut is barely any lower, at ISK 2,247 per square meter, per month.

The overall rental cost is generally highest in the center of Reykjavík and decreases with distance from the most expensive neighborhood.

Jóhann says that rental costs downtown are making it so that people avoid looking for places to live in the district. “There is nothing there for the normal average couple. People are searching instead in the outer suburbs where the rent is high, but not quite as high as in the city center.”

The Icelandic Renters’ Association harshly criticizes the government’s idea to write off a portion of people’s mortgages, saying the move does nothing to help renters.

“We call for nothing less than equality in this matter,” says Jóhann. He adds that many people chose to remain in the rental market instead of buying property in the run up to the collapse, because they were wary of the effects of inflation indexing on loans. Now those who took the risk are being rewarded and those who were sensible are left with eternally rising rental bills.

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