In an interview with RÚV, Landsbanki economist Ari Skúlason states that residential apartments have been constructed that, despite warning signs, buyers do not want or cannot afford. As noted in a recent report by the Iceland Housing and Construction Authority (Húsnæðis- og mannvirkjastofnun), the upshot of such construction is that new apartments take roughly twice as long to sell than older apartments.
Slow sales for new apartments
A recent report by the Iceland Housing and Construction Authority notes that the housing market in the Greater Reykjavík Area in 2019 was mostly stable. Three of every four apartments were sold for less than the asking price, whereas only 6-7% went for more (most often in zip codes 103 and 108, and in Kópavogur and Garðabær).
The report makes special mention of average sales time, i.e. how long, on average, it takes to sell an apartment.
It took on average 87 days for homeowners to sell apartments in the Greater Reykjavík Area in 2019 (which is comparable to previous years), as compared to an average of 176 days for new residential apartments. If only the last three months of 2019 are taken into account, it took on average 217 days for new apartments to be sold.
A shortage of smaller, simpler apartments
The report suggests that either the market is not fulfilling the needs of buyers or prices are driving them away. Ari Skúlason, an economist with the Landsbanki bank, believes both to be true. “I think it’s evident that during the past few years we’ve seen residential apartments constructed that are too big and that people don’t want. We also need smaller, simpler apartments. The writing has been on the wall for many years, and yet we have seen a great deal of energy invested in the construction of apartments that people do not want and, perhaps, cannot afford to buy.
Discounts in select neighbourhoods
As noted in his interview with RÚV, Ari does not expect prices for new residential apartments to drop: price stagnation is more likely. “It could be possible, in certain neighbourhoods, like in central Reykjavík, that homeowners will need to offer a discount to sell their apartments.”
The report also notes that 3,400 new apartments were put on the market in Iceland last year, the greatest increase since 2008 when 3,700 apartments were added to the Icelandic market.