Supply of Affordable Housing Continues Decline in Capital Region Skip to content

Supply of Affordable Housing Continues Decline in Capital Region

By Erik Pomrenke

architecture Kirkjusandur apartments
Photo: Golli.

The June report from the Housing and Construction Authority shows several trends, the most important of which is likely the continuing decline of affordable housing in the capital region.

Key points from the report

  • Total Property Valuation: 15.3 trillion ISK, over four times Iceland’s GDP.
  • Capital Area: Property valuations increase by 2.1%.
  • Rural Areas: Average increase of 6.6%.
  • Municipal Variations:
    • Highest increase in Flóahreppur (20.6%).
    • Significant increases in Tálknafjarðarhreppur (20%) and Skeiða- og Gnúpverjahreppur (19.8%).
    • Decrease in Kjósarhreppur (-1.5%).
  • Commercial Properties:
    • 5.4% increase in the capital area.
    • 7.4% increase in rural areas.
  • Summer Houses: Increase by 15.6% nationwide.
  • Average Property Valuation:
    • New average: 72.3 million ISK (previously 69.9 million ISK).
    • Capital area: Increase from 83.3 million ISK to 85 million ISK.
      • Multi-family apartments: Increase to 68.6 million ISK.
      • Single-family homes: Increase to 130.5 million ISK.
    • Neighboring municipalities: Increase from 58.4 million ISK to 61.2 million ISK.
    • Rural areas: Increase from 41.4 million ISK to 45 million ISK.

Supply of apartments changes little as demand increases

The apartment market has seen increased activity with more purchase agreements in recent months. Prices have risen by 4.9% in the first four months of the year, which translates to a 12.2% annual increase.

At the end of May, there were about 3,350 apartments for sale across the country, with around 2,000 in the capital area. Roughly half of the apartments for sale in the capital area are in Reykjavík, with more new listings in Reykjavík and Hafnarfjörður. In Kópavogur and Garðabær, the supply of new apartments has decreased, with around 70 new apartments for sale in each area.

More sales above asking price

The percentage of apartments sold above asking price has been increasing monthly in both the capital area and its outskirts. In April, 19% of all apartments were sold above asking price, with 21.3% in the capital area and 18.1% in its outskirts. This trend reflects rising apartment prices, similar to previous periods of market price increases in 2016 and during the onset of the COVID-19 pandemic in 2020.

In rural areas, the proportion of apartments sold above asking price is more variable, decreasing to 8.3% in April from 14.3% in March. This decline is partly due to fewer multi-unit apartment sales compared to single-family homes, which typically see higher proportions of sales above asking price in rural settings.

Almost no apartments in capital area under 60 million ISK

The report also notes that the supply of apartments priced under 60 million ISK [$430,000; €402,000] has decreased since last year, now comprising less than 15% of the total market supply. This shortage suggests difficulties for first-time buyers entering the market, which is further highlighted by a decline in young buyers in the first quarter of this year.

 

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