Young people face steepest rise in housing burden

Young people with mortgages have experienced the sharpest increase in housing costs, while disposable-income purchasing power has generally grown more among people over 50, according to findings presented at a meeting of Iceland’s Economic Council, mbl.is reports.

The meeting included a tripartite discussion between the government, the Icelandic Confederation of Labour and the Confederation of Icelandic Enterprise on price developments in connection with collective wage agreements in the general labour market.

Three working groups presented findings on income and the financial position of different groups in society, options for reducing automatic price adjustments, and the feasibility of improving wage statistics for Iceland’s labour market. The wage statistics committee has also begun a specific assessment of wage drift.

An analysis of income trends and the financial position of social groups over the past decade found that purchasing power increased across all income deciles during the period covered by the current collective agreements, with no significant difference in the rate of increase between income groups. Over longer periods, since 2015 and 2018, disposable-income purchasing power increased proportionally more among lower-income people than higher-income people.

The analysis also examined different groups’ position in the housing market. Renters generally pay more for housing as a share of disposable income than people with mortgages. Since 2018, however, renters’ housing burden has changed little on average, while it has increased among people with mortgages, particularly younger people.

Among Icelandic citizens under 40, the proportion who own property in Iceland has risen since 2015. Among foreign citizens, the proportion has fallen.

After housing payments are deducted from disposable income, purchasing power for other consumption can be measured using the consumer price index excluding housing. By that measure, purchasing power increased among all the groups examined over the periods covered by the report. The increase was greatest among people over 50 and smallest among those aged 30 to 49.