Housing market records fewest August sales since 2014

Iceland’s housing market had its quietest August for registered sale contracts since 2014, mbl.is reported, citing a new monthly report from the Housing and Construction Authority (HMS). Activity picked up somewhat in September but remains low compared with recent years.

The report says the housing, rental, lending and construction markets are all showing signs of cooling. Property transactions have fallen and the number of homes for sale has increased. A rental market survey also suggests that more people are becoming stuck renting.

The supply of newly built homes for sale has remained relatively stable since the start of the year, as construction of new homes has slowed alongside sales. The supply of older homes, however, has risen quickly as the housing market has cooled.

Rents have not kept pace with overall inflation. Tenants surveyed by HMS said the supply of rental homes had increased in recent months, but the findings also indicate that more people are renting because they have no other option.

Among renters of Icelandic origin, the share who said they rented out of necessity rose from 57% in 2017 to about 77% today. The share who said they wanted to rent fell from 29% to about 12%. Temporary renters accounted for an average of about 11% over the period.

Renters have also been spending longer on the rental market. Their average time as renters is now about 12 years, up steadily from about seven years in 2019, according to the report.

Families’ average equity in property increased from a year earlier as their debt levels fell. Debt relative to property value varied by household type: it was just over 40% for single parents, about 36% for couples with children and 13% for childless couples.