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30,000 New Apartments Needed to Meet Demand

An estimated 30,000 new apartments are needed in Iceland over the next decade to meet expected demand. Despite a record number of apartments having been constructed last year, the demand has only increased, according to the Housing and Construction Authority.

500 more apartments than originally estimated

At the beginning of 2021, the Housing and Construction Authority published a report on housing demand in Iceland. The original report estimated that 3,950 apartments would need to be constructed by the end of the year to maintain stability in the housing market. With the population growing at a quicker rate than previously expected, however, the Authority has updated its report, revising its estimate to 4,450 apartments.

In an interview with Vísir, Karlotta Halldórsdóttir – an economics specialist with the Housing and Construction Authority – stated that the demand for housing in Iceland was relatively high. “We are constructing approximately 3,000 apartments annually, which is quite good. However, its speaks to a considerable shortage, the fact that approximately 4,500 apartments are needed this year to meet demand.” Karlotta added that this shortage did not mean homelessness but rather that young adults would be living at home with their parents for longer, or that more individuals would be residing in non-residential buildings or unauthorised housing.

A shortage of plots

According to Karlotta, contractors have complained of a shortage of building sites, which municipalities must provide. “A shortage of plots is inhibitory to the construction of apartments. It appears as if contractors are capable of building more but that the paucity of land makes it difficult.”

A record number of new apartments were constructed last year, approximately 3,800. “In reality, it’s not the pace of construction; it’s just that there is great demand these days,” Karlotta remarked. Despite this increased demand, Karlotta encouraged buyers to remain patient.

“I think it’s important for buyers not to rush. More apartments will become available. We’re seeing a rise in prices, which most likely originates with a lack of supply, but buyers should take their time, as opposed to rushing to buy.”

Increased demand for larger homes

Earlier this month, RÚV reported that Landsbankinn’s Department of Economics had predicted a 10.5% increase in real-estate prices in 2021 compared to last year. Þorsteinn Arnalds, Director of the Housing and Construction Authority, stated that this increase was to be attributed to lower interest rates. Þorsteinn added that the pandemic has seen increased demand for larger, single-family homes.

“It’s clear that single-family homes, especially larger homes, have seen a rise in prices. Maybe this owes to the increased need for better and roomier housing following social restrictions. I don’t expect this trend to change in the capital area, as we don’t expect the supply of single-family homes to increase in the immediate future; it’s mainly apartment buildings that are being constructed.

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