According to a real-estate developer in the capital area, the process of selling apartments has lengthened considerably as compared to the autumn. Last fall, every unit in one of the developer’s buildings was purchased over a single weekend. Presently, however, a nearby building of similar design has only seen three units sold. None of the purchasers were first-time buyers.
No first-time buyers
As noted by RÚV, two similar buildings stand side by side on Kinnargata in Garðabær. Units within one of the buildings went on sale last fall; apartments in the other building went on sale at the beginning of the year. Developer Eggert Elfar Jónsson told the national broadcaster that when his company started selling apartments in the first building last September, all of the units were sold over a single weekend (the following Monday, they had received 30 offers for all 15 of the apartments – and all the units were subsequently sold.)
“And then we have another building that was ready six months later,” Eggert stated. “And we put the units on sale in late February, early March. There were maybe 20 to 25 groups that attended the open house. We received eight offers – but only three were accepted.”
Eggert described his surprise at learning that none of those who had bought an apartment in the two buildings were “first-time buyers,” especially considering the size of the apartments. He believes that fewer and fewer people are being approved by the bank’s payment evaluation system. “Interest rates have been rising continuously, and these two things [i.e. rising interest rates, which lead to stricter payment evaluations] are just pushing this group completely out of the market,” Eggert observed.
A simmering pot
As noted in the Central Bank’s recently-published Financial Stability report, the finances of households and companies in Iceland are deteriorating due to high inflation and higher interest rates. “The outlook is for inflation to be stubbornly high and debt service burdens to grow heavier,” the report reads. The Central Bank will announce its decision on whether or not to further raise the interest rate on Wednesday.
Eggert told RÚV that 3,500 new apartments must be brought onto the market every year to meet demand, although, as it stands, it looks as if far fewer will be constructed: “They’re putting a lid on this simmering pot. But if the market, generally speaking, calls for 3,500 apartments, and if first-time buyers are currently being kept away, it’s only right to expect the demand to double after some time or some months,” Eggert concluded.