Social Democrats warn land handover may signal weaker investment

Representatives of Iceland’s Social Democratic Alliance on Reykjavík City Council have raised concerns about the country’s economic outlook and the potential impact on business investment, mbl.is reported. Their comments came after the council approved the reversal of a land allocation at Esjumelar to FnFP ehf. at the company’s request.

Pétur H. Marteinsson, the party’s leader on the city council, and Heiða Björg Hilmisdóttir, a former mayor, said the request should be examined as a possible sign that an economic contraction was approaching.

“When landholders choose to give up an allocation, we must remain alert to whether this indicates that economic conditions are beginning to seriously affect companies’ plans,” they wrote. “Inflation, high interest rates and caution in financing appear to be slowing development and reducing demand for business plots in Reykjavík.”

They said it was important to monitor whether the case was isolated or a sign of a broader decline in business investment.

Annual inflation stood at 5.6% last month, its highest level during the current parliamentary term. The Central Bank subsequently raised its key interest rate to 8.0%.

Other indicators also point to a cooling economy, particularly in construction. Unemployment stood at 5.5% the previous month, and the Directorate of Labour expects it to rise.

FnFP is owned by Guðmundur Fertram Sigurjónsson, commonly associated with Kerecis, and his wife, Fanney Kristín Hermannsdóttir. The plot had 1,317 square metres of building rights. The request was approved without objections, but a confirmation payment of nearly 10 million Icelandic krónur will not be refunded under the allocation terms.