House prices in Reykjavík have risen sharply, with an average increase of 22.3% in the past 12 months. Detached home prices are up 25.7% and the price of the average price of an apartment is up 21.5% year over year, RÚV reports.
The steady rise in real estate prices has caused the consumer price index to follow suit, prompting Landsbanki economists to raise their inflation forecasts. Inflation stands at 7.7% in May.
Not responding to rate increases
The Central Bank adjusted interest rates earlier this month in an attempt to cool the housing market, but the rate hike hasn’t shown results as yet.
House prices have not been as high in relation to wages since the boom years of 2005 to 2008 that preceded Iceland’s economic collapse.