Rising Reykjavík Property Prices
Property prices continue to rise in Reykjavík, partly because of pressure from the tourist rental market, RÚV reports. More than 4,000 apartments in Iceland are rented out to tourists, SA-Business Iceland estimates. The price per square meter has gone up by more than ISK 100,000 (EUR 678, USD 777) in multi-family homes in the past five years in older parts of the city.
In the city center, as well as the western part of Reykjavík, the price increase this period is more than ISK 120,000 (EUR 813, USD 932) in multi-family homes. The Fossvogur neighborhood has meanwhile seen an increase of ISK 90-100,000 (EUR 610-678, USD 700-777) per square meter (about 10.8 square feet) in multi-family homes, whereas in the Grafarvogur neighborhood of Rimar, the increase is over ISK 70,000 (EUR 475, USD 545).
“When comparing figures from 2010 and this year, we see the centrally-located neighborhoods with the largest increase,” clarifies Jón Þór Finnson, an engineer at the National Registry. Property prices in up to a 2-km (1.24-mile) radius from Lækjartorg, in the city center, have gone up by more than 55 percent. At a 2-4 km distance, the increase is 50 percent. There has been a price increase in all the greater Reykjavík area and most commonly over 30 percent. This trend is in line with other developments within the economy. The increase in the number of tourist may play a role here with the advent of Airbnb and other options for short-term renting.
The fact that over 4,000 apartments are being rented out to tourists puts pressure on the rental market, asserts Ásdís Kristjánsdóttir, chairperson of the economic department of SA-Business Iceland, and that leads to higher property prices. Another explanation for higher property prices is lack of supply, Ásdís explains: “After the crash, we’re in a situation where building costs are higher than property prices. Therefore, building contractors don’t have the incentive to begin new construction, so there is this lack of supply and that has put pressure on property prices.”