The house price index in the capital area fell by 0.5% month-on-month in January. In the last three months, the index has decreased by 1.4%, which is the biggest decrease over a three-month period since August 2010. This is noted by Landsbanki bank’s Hagsjá report.
Housing market showing significant signs of cooling
The Landsbanki bank published its Hagsjá report this morning. The report, referring to data published by the Housing Construction Authority yesterday, notes that apartment prices in the capital area fell by 0.5% between December and January. This is the third month in a row that the index has decreased between months. Such a long continuous decrease has not been seen since the end of 2009. Decreases between months at that time were, however, somewhat greater than what is seen now.
“Nevertheless, this measurement and the latest trends,” the report reads, “indicate that the market is starting to show significant signs of cooling. This will contribute to the lowering of inflation, just as the Central Bank’s actions – which now seem to be yielding some results – have aimed to do … it is obvious that the market in the capital area has started to cool down considerably.”
The report notes that the price of detached houses decreased by 0.74% month-on-month, while apartment prices have decreased by 0.4%. In the last three months, detached houses have decreased by 4%. The cooling of apartment-building prices has not been as rapid; in the last three months, the price of apartments has decreased by 0.7%.
“The annual increase in the house price index is now 14.9%, which has not been lower since May 2021,” the report points out.
Fewer purchase agreements signed
Hagsjá also notes that the number of purchase agreements signed for residential property has not been lower since January of 2011, or 280. In comparison, 529 purchase agreements were signed last December.
“It should be kept in mind that these are preliminary figures, which are subject to change as more purchase agreements are received by the Housing Construction Authority. The month of January is often quiet in the housing market, but this most recent January appears to stand out.”
The report concludes by saying that the housing market is starting to show rapid signs of cooling: “The Central Bank has implemented various measures to stem rising inflation, e.g. increasing its interest rates significantly and tightening borrower conditions, which now seem to be producing the desired results.”