Property Appraisal and Taxes Affect Downtown Reykjavík Businesses Skip to content
Empty Storefront Skólavörðustígur Laugavegur

Property Appraisal and Taxes Affect Downtown Reykjavík Businesses

Twelve storefronts stand empty at the heart of downtown Reykjavík, at the intersection of Laugavegur and Skólavörðustígur streets. Rising rents are believed to be the main factor that has pushed local businesses out of downtown, some of which served customers in the centre for decades. Benóný Ægisson, chairperson of the Association of Downtown Reykjavík Residents, told RÚV there are few services left downtown for locals.

Property tax rose by 60%

Hardware store Brynja, at Laugavegur 29, has stood at its location for a century. Its CEO Brynjólfur Björnsson says rising property tax is pushing up rent in the area. “When [property taxes] are so high then of course the rent increases or the shop owners can’t manage this high rent. I know that here the property tax has risen 60% over the past three years but nothing has changed here, the building is exactly the same, and we haven’t changed anything. Why has it increased by 60%? We’re not getting any special services.”

A cycle that raises prices 

Sigurborg Ósk Haraldsdóttir, chairperson of the city’s Planning and Transport Committee, says the National Registry is partly responsible for rising housing costs in downtown Reykjavík. The registry adopted a new method of calculating real estate value in 2014. In 2018, rateable value rose by 17.2% in the Capital Area overall.

The National Registry’s new appraisal method could be causing a cycle of rising prices, where higher rents lead to higher real estate appraisal value and vice versa. “This is an algorithm that is somewhat opaque. I second that. This, in turn, has an impact on the rental price, which then has an impact on the real estate value, so this is maybe not a good development,” Sigurborg observed.

Fewer services for locals

Herrahúsið, Kúnígúnd, and Frank Michelsen’s watch workshop are just a few examples of long-standing shops that recently relocated away from downtown. These three businesses all graced Laugavegur street for between 37 and 76 years. “This has been happening for about the last two years,” says Benóný. “I’m not an expert, but I think it’s because rent has just become so expensive,” he stated.

Shops and businesses have, however, been springing up on side streets in the area, such as Hverfisgata. Benóný hopes new construction will bring down rent in the neighbourhood and prompt the return of essential services. “There is for example no fish shop here, there’s no butcher, there’s just one shoe repair store, the post office is gone, there’s just one bank left. The services which are essential to us residents have been disappearing.”

Shopping habits are changing

Sigurborg says the City of Reykjavík plans to address the situation by lowering its tax mark-up on commercial real estate from the current 1.65% to 1.6% by 2022. She says, however, that she is not worried the empty storefronts downtown are forebearers of the death of Laugavegur. “There are empty rooms in Kringlan [shopping centre] as well,” Sigurbjörg says. “Shopping and shopping habits are changing. We are investing more in experiences, we are investing more in quality of life and that’s what the city centre offers.”

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