Iceland Mag

14 Reykjavik

Iceland Mag

Economy

Reykjavík real-estate market booms: 20% increase since March 2016

By Staff

  • Rushing to meet demand The main drivers of rising prices are rising real-incomes and demand which outstrips supply. Photo/Vilhelm

The housing market in Reykjavík is in the middle of the largest boom since 2006. Real-estate prices rose on average by 2.7% in March, bringing the 12 month increase to 20.9%. According to analysis by Landsbankinn bank (pdf) the real-estate market has now made up virtually all the decrease it experienced following the 2008 financial crash. In real terms the prices are now just 1% below the previous peak in October 2007.

Read more: Iceland led the global real estate price increases in 2016

Rising real-estate prices in the capital are now the only driver of inflation in Iceland: In the absence of real-estate prices the consumer price index fell by 1.7% year-over-year.

The major drivers of rising real-estate prices, according to Landsbnakinn, are the strong economic growth and low unemployment which have ensured steadily rising real-incomes for the past few years. Demand for housing has also exceeded supply for some time. Too few new homes were built in the years following the 2008 financial crash. 

Read more: More than 1/10 of overnight stays in Airbnbs, almost as many at campgrounds, in camper vans

In recent years demand has also spiked, due to a variety of factors, several of which have to do with tourism. Recent years have seen increasing immigration by workers in the tourism industry who are needed to fill positions which the domestic labour market cannot fill. A shortage of hotel space has also generated a growing demand for properties on Airbnb and similar sites.

Related content

Editor's Picks