Rates in Reykjavík’s competitive rental market are on the decline, a development that observers largely credit to an overabundance of unused short-term rentals for tourists, RÚV reports.
According to new data supplied by Registers Iceland, rental prices have dropped by 4.3% in the last three months, amounting to an annual decrease of 0.2%. Vignir Már Lýðsson, an economist who works for the rental guarantee service Leiguskjól, says that the decrease can be attributed to the large number of Airbnb apartments that entered the rental market when the COVID-19 pandemic began and tourism was halted.
In many cases, the owners of these properties have put them on the market at lower rates than they normally world. The rental periods offered are, however, still relatively short-term, which indicates that owners are still hopeful of returning them to the tourist market as soon as possible. “These apartments are generally fully furnished, which indicates that these are Airbnb apartments,” explained Vignir. “The parties who are renting them out have an entirely different and higher required rate of return on their owner’s equity, so these low rental rates won’t last long – these apartments will rather be sold if the tourism market doesn’t right itself.”
There are also cases where landlords have temporarily renewed long-term leases at a lower price. Because of the short-term nature of these lower renewals, this can’t be taken as a permanent change in the market, either. But lower rental market prices has led to demand for rental housing shooting up to previously unseen levels. “We’ve seen demand increase tremendously – as people see these low prices, more people are [entering the rental market] who up until now hadn’t been thinking of moving,” concluded Vignir. “These are, perhaps, people who have been living in their parents’ homes, renting with roommates, and others.”