Overwhelmed by the prospect of high mortgage payments, a young, Icelandic couple decides it can't afford to buy an apartment.
“Not every one has parents able to help with the down payment,” Hulda Ösp Atladóttir and Baldur Guðmundsson told RÚV yesterday. They are the parents of two young boys and live in a rental unit in Kópavogur. They’ve just been told to vacate the apartment within a few weeks, because it has been sold. This being the second time they must move for such a reason, they had decided to purchase their own apartment.
They’ve been renting since they were teenagers, but now that they have a five year old and a baby, they wanted more stability in their lives. As a result, they made a 34 million ISK (230.300 EUR, 256.000 USD) offer on a two-bedroom apartment, applied for an 85 percent loan and intended to use their pension savings for a down payment. Their earnings are above average, Hulda being an attorney and Baldur a journalist. They were offered an additional four million ISK five-year loan. Taking all costs into account, their monthly mortgage payments would have amounted to 270.000 ISK (1800 EUR, 2.000 USD).
“It wasn’t worth it,” Hulda said, “The numbers didn’t add up.” There clearly is a lack of options for those who either don’t want to or cannot buy their own housing. The couple is now faced with the prospect of having to move every few years from one apartment to the next. Baldur voices a common concern among young couples: “It’s hard to save up for a down payment when you’re renting, because rent is so high.”
In fact, worries are growing in our society that the tremendous cost of housing is causing our young couples to look for better options abroad. We may, indeed, be losing many of our young people to countries which are more family-friendly than Iceland in that regard.
In the editorial of Hringbraut today, Sigmundur Ernir Rúnarsson tells the story of a couple who had been living in Iceland for ten years. The husband is Danish, the wife Icelandic, and they have four children. Despite being educated and having decent jobs, they were having trouble making ends meet.
They then found out that the husband’s mother, retired in Denmark, had more disposable income than her son. That information made them think twice. They moved to Denmark, bought a 40 million ISK (271.000 EUR, 301.000 USD) house with a 2.4 million ISK down payment (16.300 EUR, 18.000 USD) and got a mortage at 1.2 percent interest. A few months went by and, unlike in Iceland, they saw their principal go down (in the absence of inflation or an indexed loan).
Not only that, but in similar jobs as before, their disposable income had now doubled. This is due to high child benefits, free preeschool, financial support for extra-curricular activities for the older children, and the price of food being lower than in Iceland.
Sigmundur Ernir states, “This couple has the impression it has left a hostile society for a friendly one; left one that treats people badly for one that treats them well.” He continues, “The largest question Iceland faces as a nation is this: Is the country competitive when young Icelanders choose a home and a place to live?”