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Housing Market the Worst in 50 Years

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Housing Market the Worst in 50 Years

Reykjavík with Hallgrímskirkja in the background

Photo: Páll Stefánsson.

The situation in the housing market in Iceland is the worst it has been in half a century, according to Sverrir Kristinsson, who has worked as a real estate agent in Reykjavík since 1968. His suggestion for solution: “Many more lots must be prepared as building sites; more one and two-bedroom apartments must be built; and we must build much faster than before.”

In an interview on RÚV radio this morning, he agreed that there is an emergency situation in the housing market right now. He said price increases are so rapid thad it has become very difficult for young people to save up for a down payment on a first home.

“Let’s take young people who one, two or three years ago began saving up for a one or two-bedroom apartment for ISK 30 million [USD 272,000, EUR 251,000]. During this time, the apartment goes up in price by ISK 6 million [USD 54,000, EUR 50,000], and what these people have saved up during this time hardly covers the price increase, let alone more.”

The price of multi-family homes went up by 18.7 percent in the past 12 months, and single-family homes by 18.8 percent. These are the largest price increases since the beginning of 2006.

Supply is very limited and buyers fight over what is available, Sverrir stated. He is surprised that when banks calculate the financial position of individuals to determine how large a loan they can obtain, that is, give them a mortgage preapproval, the monthly rent they pay is not taken into account.

“This,” he concluded, “is lacking in the policy of the authorities. As a general rule, should people [in this country] be renters, or should the policy be one of private ownership?”

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