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Reykjavík House Prices to Hit All-time High?

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Reykjavík House Prices to Hit All-time High?

Hafnarfjörður

Photo: Páll Stefánsson.

The National Registry of Iceland this week published its latest figures on the housing market, which showed a huge jump in house prices between February and March.

The monthly increase in March figures in the capital region were higher than have been seen for years, DV reported—and the trend shows no sign of slowing.

Property prices in the capital area rose by 2.7 percent between February and March, which was 2.5 percent on apartments and 3.3 percent on houses. According to National Registry data, the cost of buying a home in the capital has shot up by nearly 21 percent in one year.

According to Landsbankinn economists, the last time house prices increased this rapidly was in 2006.

While the inflation was nearly 21 percent in the year to March 2017, the same rate was just 3.6 percent a year earlier.

The overall inflation picture in Iceland has been low and steady for several years, which makes property price inflation all the more noteworthy.

The all-time high in the market was reached in October 2007, but shrank back rapidly with the global credit crunch and then the Icelandic banking crisis. However, March figures were only one percent below that historic high point, meaning that April is likely to beat the record.

The rises are not restricted to Reykjavík and neighboring municipalities. Figures to the end of last year show the rate of rise in Akureyri and Akranes as similar to that in the capital, while prices were rising faster in Árborg and Reykjanesbær.

Experts believe that as the growth in Icelanders’ purchasing power has been slowing, it is mostly the shortage of supply over demand which is keeping prices going up. Equilibrium is not expected to be reached for several years yet.

The construction of new homes is not keeping up with demand and although it is now a good time for builders to invest in residential, it takes quite a long time for their efforts to filter through to house prices.

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