Biggest Residential Construction Boom Outside of the Capital Since Crash Skip to content

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Biggest Residential Construction Boom Outside of the Capital Since Crash

There are more apartments under construction outside the capital area than there have been since 2008. Vísir reports that there are currently 2,672 apartments being built outside of Reykjavík, the largest share of which—1,100 units—are located in South Iceland.

These figures come via the latest economic outlook report published by Landsbankinn’s economic department. The report also states that based on figures from Statistics Iceland, it appears that apartment prices both in- and outside of the capital are developing in a similar way, although apartment prices outside of the capital are actually rising faster.

Sales have gone up and prices have risen

There’s been a great deal of demand for housing over the last few years and the economic outlook report says that post-pandemic, low interest rates and changing consumption habits have boosted demand considerably. Sales have gone up and prices have risen.

Since last July, the residential market price index has gone up 22% for single-family homes in the capital area, while multi-family units have gone up by 24%. But the index outside the capital over the last twelve months has gone up even more: 29%.

Taking a broader snapshot of housing price increases across the board: compared to pre-pandemic, in February 2020, the residential market price index has gone up between 45 – 47%, regardless of whether it’s single- or multi-family homes in question, within the capital, or outside of it.

Most new builds in South Iceland, fewest in the East, Northwest, and Westfjords

Construction outside the capital is split pretty evenly between multi-unit and single-family residences. So far this year, there’s been a 12% increase in the number of apartments under construction, as compared to an over 33% increase between the end of 2020 and the early months of 2021. Before that, between 2009 and 2016, very few new apartments entered the real estate market, although there were many under construction.

The greatest proportion of new residential builds outside the capital area are, as mentioned, in South Iceland. The housing stock in the region has gone up by 4% in the last year, amounting to almost 500 new apartments. In the first seven months of this year, the stock increased by 1.7%, or just over 200 new apartments.

The housing stock on the Suðurnes peninsula alone has gone up by 2.5% since the start of the year; in 2021, it went up by almost 2% in the course of the year. This is on par with the increase of housing stock throughout all of North Iceland combined, where 260 new apartments were completed last year.

There are currently 500 apartments under construction on Suðurnes and in West Iceland, around 350 in Northeast Iceland, and fewer than 100 in East Iceland, Northwest Iceland, and the Westfjords.

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