There have not been fewer apartments under construction in the Reykjavík capital area since February 2017, RÚV reports. If the trend continues, housing prices will continue to rise in the region. The main reason is a lack of plots, according to the Federation of Icelandic Industries (Samtök Iðnaðarins, or SI).
There are currently just under 3,400 apartments being built in the capital area. This is an 18% drop compared to the same time last year, when there were 4,100 apartments under construction. The biggest contraction is in Reykjavík, where apartment construction has dropped by 24%, and the smallest in Kópavogur, where it has contracted by 10%. Three out of every four apartments under construction in the capital area are in these two municipalities.
Read More: Iceland’s Housing Market
The combination of high demand and low supply pushes housing prices upward, which can be dangerous for the housing market. Ingólfur Bender, SI’s chief economist, stated the lack of building plots is the main issue. “That’s where the bottleneck is, as we have been pointing out for a long time. The municipal authorities have been twiddling their thumbs on this issue.” Ingólfur says the Central Bank’s decision to tighten mortgage regulations will lower demand, but supply is the root of the problem.