First-time buyers still entering Iceland housing market

First-time buyers are continuing to enter Iceland’s housing market, while real home prices are falling and are expected to keep declining, mbl.is reports. Tómas Brynjólfsson, the Central Bank of Iceland’s deputy governor for financial stability, said there were no signs of a market freeze or of worsening conditions for young people seeking to buy their first home.

Speaking at a morning meeting of the Housing, Construction and Planning Authority, Tómas said the housing market was characterised primarily by a substantial oversupply, particularly of newly built homes. Construction of new housing nevertheless appears likely to slow in the coming months.

There have been about 15 per cent fewer purchase agreements so far this year than during the same period last year. Tómas said the previous two years had been unusually active, especially 2024, when around 3,000 people had to move from Grindavík, creating additional demand for housing.

“There has been a decline in demand, but it is from a very high level, and the data certainly do not show any kind of freeze in the market,” he said.

Tómas said statistics did not support claims that first-time buyers were being shut out of the market. Their numbers had not declined recently, he said, and roughly as many people were entering the market each year as in each age cohort. The average age of first-time buyers had also remained unchanged, or even fallen slightly, according to the data.

In an interview with mbl.is after the meeting, Tómas said he was surprised by how many first-time buyers were managing to enter the market despite high prices and interest rates.

He said the housing market had entered an adjustment process that could last several years. Oversupply and weaker demand had caused real home prices to fall, and they were likely to continue doing so.

“There is therefore nothing to indicate that the position of young people trying to enter the market will necessarily worsen in the coming months. It is more likely to improve,” he said.

“People should certainly not see the market as closed. That is not the case at all.”