Iceland’s housing market continues to cool

Apartment prices continue to rise modestly month on month, but the housing market is still cooling, according to real estate agents, mbl.is reports, citing a monthly report from the Housing and Construction Authority.

The report says first time buyers accounted for a smaller share of purchases than in recent years. Many have received substantial financial support from parents or close relatives, while demand for shared equity loans has been high in recent months.

Four out of five apartments sold in July went for less than the advertised price. The longer a property has remained on the market, the more likely it is to sell below its advertised price. More than 85 per cent of properties that had been listed for over a year sold below the advertised price during the past two years.

Average rents also fell considerably month on month. The report attributes this to student apartments generally being smaller than other rental properties, resulting in lower total rents.

Construction market shows signs of cooling

The report says the lending market has already passed the Central Bank’s policy rate increase from August on to variable, non indexed mortgage rates, while fixed non indexed rates have changed less.

The construction market is also continuing to show signs of cooling, with fewer employees and lower residential investment year on year. Turnover in housing construction fell slightly in nominal terms in May and June compared with the same period last year. Turnover in construction of other structures and specialised construction, however, increased considerably during the period.