Housing market stabilizes amid rising demand in Iceland’s capital region

The housing market is showing signs of stabilizing despite growing demand. There are currently half as many apartment constructions underway compared to what municipalities anticipated. Interestingly, while the number of purchase agreements has decreased, the total number of sold apartments has seen a slight increase. This indicates that buyers are opting to secure multiple properties at once.

Recent data reveals that the inventory of available apartments rose nearly ten percent month-over-month, increasing from 3,300 at the end of July to 3,600 by the end of August, with most of the growth occurring in the capital region. Over the past year, apartment prices have increased by 4.5 percent above inflation. Much of this can be attributed to a rise in the sales of newly constructed apartments, even though they still make up a small portion of the total transactions. Single-family homes have seen price increases nearly double compared to multi-family units in the capital area, while the opposite trend has occurred in rural regions, where multi-family prices have risen more than those of single-family homes.

Meanwhile, the Central Bank of Iceland has tightened lending conditions for housing purchases over recent years. Consequently, individuals with a monthly payment capacity of up to 250,000 ISK can only afford to purchase 382 of the 2,260 available apartments in the capital, representing 17 percent. Without these restrictions, they could potentially bid on 1,337 apartments, or 59 percent.

Construction is lagging in various municipalities. In Garðabær, nearly all intended units are being built, but other areas, such as Kópavogur and Reykjavík, are seeing significantly fewer constructions than planned.