Contractors and designers report growing shortage of work

Contractors and designers are increasingly struggling to find projects, while many construction companies are carrying completed unsold apartments and homes under construction that are generating substantial interest costs, mbl.is reports.

“There are many completed, unsold apartments and apartments under construction that are absorbing a great deal of interest costs in the construction market, and I think companies are in very different positions,” said Páll Daníel Sigurðsson, managing director of construction company Eykt.

Iceland’s Federation of Industries has called on the Central Bank of Iceland to leave its key interest rate unchanged at its next rate decision on Wednesday, August 19. Although inflation remains well above the bank’s target, the federation says further rate increases could impose too much restraint under current conditions.

Páll said he agreed that raising rates on Wednesday would be “unwise”.

“I think things will deteriorate very quickly for construction contractors if there is no sign of improvement soon,” he said.

The Federation of Industries has reported that construction industry arrears at the country’s three major commercial banks nearly tripled during the first half of the year. They amounted to 29.7 billion Icelandic krónur at mid-year, compared with 9.3 billion krónur at the end of last year.

Páll said he did not have the same overview as the federation, but that he was feeling an increasing contraction in the market.

“I find that more and more people, both designers and contractors, are getting in touch because they need projects. Projects are now stopping, and new projects are not starting among those building on their own account. They then look for work, and I do not have projects for designers or smaller contractors,” he said.

He said Eykt’s position was relatively good. The company had recently started two interior projects, meaning its situation was not necessarily representative of the market.

“It is simply a question of how fortunate people are when things work out. We do not have many unsold apartments, but many others have a large number of unsold apartments, especially companies that have focused almost exclusively on building residential properties,” Páll said.

A more detailed report will be published in Morgunblaðið tomorrow.