More than 4,000 Apartments Needed to Meet Housing Demand

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According to the latest report of the Confederation of Icelandic Industries, it is expected that in the next three years, there will be 4,360 fewer completed apartments entering the market than the estimated demand requires.

According to the forecast, a total of 2,800 completed apartments will enter the market this year. By comparison, approximately 3,800 completed apartments entered the market in 2020, followed by a decrease to around 3,200 in 2021, and then approximately 2,800 last year.

Read More: Difficult for First-Time Buyers to Enter Market

The recent report also predicts further contraction in 2025 and 2026. Looking further ahead, 2,800 apartments are expected in 2024, but in 2025 and 2026, the number will be no more than 2,000 per year given current trends.

However, given the current rate of population growth, it is estimated that there will be a need for 4,000 completed apartments this year and in the following two years. The accumulated deficit in supply and demand for new properties for the years 2023-2025 is projected to be 4,360 apartments.

Since the national agreement between the government and municipalities regarding the construction of 35,000 apartments over the next ten years was signed in July last year, the cost of average apartments has increased by approximately 7 million ISK [$50,000 USD, €46,000]. Interest rates have also driven housing prices up recently, and additionally, the cost of materials and labor for construction has increased by 2.6 million ISK [$18,000 USD, €17,000] during this period. An expected reduction in the tax incentives for construction will also increase the cost of apartment construction by an average of 1.2-1.5 million ISK in the coming years.

Read More: 35,000 Apartments to be Built in 10-Year Housing Plan

Given current trends, the report concludes that it is unlikely that the government’s target of constructing 35,000 new completed apartments within the period of 2023-2032 will be achieved unless the authorities take decisive action and intervene in the matter.

The recent report does, however, offer several recommendations. First and foremost, they suggest that the government should reconsider the proposed reduction of the tax refund for real estate developments.

The association also suggests that municipalities significantly increase the supply of plots and review the collection of fees before starting developments. “Last but not least, coordinated efforts by the government, municipal associations, the Central Bank, and labour market participants are needed to reduce inflation and inflation expectations, as this will create a foundation for lower interest rates,” the analysis states.

With Rising Life Expectancy, Pension Benefits Lowered by 10%

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As of July 1st, the Pension Fund for Icelandic State Employees (LSR) will lower its benefits by approximately 10%. In an announcement on the benefit cut, LSR stated that it was in part due to rising life expectancy.

The Ministry of Finance and Economic Affairs released new life expectancy tables at the end of 2021, which assume that Icelanders will live considerably longer than previously estimated, and that younger generations will have a longer life expectancy than older generations.

Read More: Cabinet to Receive 6% Raise Amid Inflation and Interest Hikes

“Someone who is in their sixties today will live two years longer than previously estimated. But someone who is 25 years old today is expected to live four years longer than previously estimated,” stated Harpa Jónsdóttir, Executive Director of LSR. She continued: “And the thing is, we are still going to pay for the same length of time, but there is no additional money coming into the pot. So, we just need to take the same money and spread it over more years.”

Pension funds must now adapt to these changes and anticipate paying pensions for a longer period than previously calculated. On average, these changes will result in a decrease of 9.9% in the monthly entitlements of those currently contributing to the fund. For those that receive pensions from the fund and do not have state insurance, the payments will decrease by 4.1% from July 1st of the upcoming year.

Read More: Central Bank Raises Key Interest Rates by 1.25%

The changes will apply to those who will receive payments from the fund in the future, while the entitlements of those who already receive payments from the fund will decrease by about 4%.

According to LSR, “the reduction in rights and pension payments is a significant measure for the fund but is nevertheless necessary given the current situation.”


36 Pools Closed Due to Strikes

Pools across Iceland are being forced to close in the wake of strikes by BSRB. On May 15, BSRB, Iceland’s largest federation of public sector unions, comprising 19 labour unions with some 23,000 members, began strike action as part of its ongoing negotiations with the Icelandic Association of Local Authorities (SNS).

In total, 37 pools are affected. 36 pools are closing, with one Westman Island pool continuing operation with limited hours.

Read More: Preschool Staff on Strike in 11 Municipalities

In addition, some 70 preschools throughout Iceland are also affected by the public sector strike. Since the parties to the most recent contract negotiation have not been able to come to an understanding, the strike has affected 29 municipalities.

Freyja Steingrímsdóttir, communications director for BSRB, stated to Morgunblaðið: “to my knowledge, they are essentially all closed. It’s a safety measure that all working staff are trained, so when this happens, the swimming pools need to be closed.”

Read More: Strikes Likely to Force Closure of Swimming Pools

The strike could also have an impact on the June 17th (Iceland’s National Day) celebrations throughout the nation, Freyja stated. “This is a temporary strike,” she streed. “There is no activity, no practices, or anything while this continues unchanged,” she stated.

In addition to pools and preschools, municipal offices and nursing homes throughout Iceland are also seeing reduced operations as BSRB continue their negotiations with SNS.

Milk Cartons Sent Abroad for Incineration, Not Recycled Domestically

Under a new recycling law introduced last year, Icelanders are now required to sort recyclables into more bins than before, including plastic, paper, metal and glass, and now, organic waste. One of the most common household recycling items is the cardboard milk carton, which most households dutifully rinse and sort into the paper bin. However, it has come to light through investigative reporting at Heimildin that milk cartons, though recyclable, are not being processed in the manner they are claimed to be.

Instead of sending the milk cartons to the compactor to be recycled alongside other paper and cardboard, the milk cartons are instead sent to a cement factory on the mainland to be burned in an incinerator.

Full Circle: Read More About Recycling in Iceland

Margrét Gísladóttir, specialist in administration and communication at Icelandic dairy concern Mjólkursamsölun (MS), stated to Morgunblaðið that it was not up to MS to decide how the company’s packages are sorted. Their role, Margrét stated, was to instead encourage consumers to properly sort packages according to the guidelines set by municipalities and government agencies.

Currently, MS buys their packages from Tetra Pak, and Margrét stated to Morgunblaðið that MS is “constantly seeking the best packaging options,” taking into account environmental sustainability and food safety. MS has used its current milk carton since 2017. When it was adopted, it was considered to have a 66% smaller carbon footprint than the previous packaging. The selection was also based on the premise that “if they were properly sorted, they would be more environmentally friendly than other packaging,” according to Margrét.

The local recycling authorities have never provided feedback to Mjólkursamsölun that other packaging options are better, according to Margrét.

Read More: New Recycling Sorting in Reykjavík

Tetra Paks are recyclable, but because they are composed of layers of plastic, paper, and aluminium, they can prove difficult for some waste management systems.

When asked by Heimildin journalists whether such Tetra Pak milk cartons had been recycled properly, officials from SORPA, the municipal association for waste management, could not confirm that this had been the case for the last 16 years.

MS is the largest user of such packaging in Iceland, with around 40 million milk cartons produced and sold annually.