Writer says Þórkatla’s decisions deepened Grindavík residents’ financial strain

In an opinion article published by Morgunblaðið, Pétur Hafsteinn Pálsson argues that decisions by Þórkatla, which acquired properties in Grindavík, have weakened residents’ finances and hindered their return home.

Pálsson writes that psychological and social wellbeing underpin physical health, and that being able to return home now would have therapeutic value. He says financial wellbeing is another key part of people’s overall welfare. He has previously criticised Þórkatla’s handling of government support measures, saying household belongings worth hundreds of tonnes were discarded and a ban on living in the town has worked against its recovery.

According to Pálsson, the properties acquired by Þórkatla had an average insurance valuation of 77 million krónur and an average debt ratio of 33 per cent. In many cases, he says, the insurance valuation was close to the market price, leaving residents with average equity of about 50 million krónur and average debts of about 25 million.

He attributes residents’ previous financial position to stable employment, low building costs, free plots and affordable local services. Short distances made it easier to raise children, he writes, while families living near one another and strong friendships provided support.

That changed when residents were evacuated on 10 November 2023, Pálsson says. People were sent from their homes and housed wherever space was available. He writes that families and generations became separated, social ties weakened and it became harder for parents to work. Parents also spent considerable time and money trying to maintain their children’s social lives. Some children attended three to five schools, depending on where their families found accommodation.

Despite grants and other assistance, residents used up their savings trying to manage, he writes. Pálsson argues that Þórkatla’s decisions meant residents had to look for new homes at the same time, each bringing an average of 50 million krónur in equity to the market. This, he says, pushed property prices up by as much as 10 million krónur.

If the average purchase price reached 100 million krónur, which Pálsson says is not a high estimate, average debt would have risen from 25 million to 50 million. He says interest rates have since surged, the market has frozen and the real value of homes has fallen. In his view, the average Grindavík resident has lost half their equity and is now tied to their new property, while some people who started with less than average may have lost everything.

Pálsson says those who suffered most financially are likely also among those most affected by the psychological and social challenges of displacement. They had no control over where they ended up, he writes, and would benefit most from being able to return home.

He says Þórkatla is maintaining its ban on living in Grindavík despite a new risk assessment that, in his view, does not rule out residence there. He also criticises pressure for residents to make premature decisions about selling their homes back, saying few can afford to do so. He argues that Þórkatla’s employees have yet to recognise the organisation’s role in helping residents and are instead approaching the task as managers of a real estate company.