New Housing Report Shows Increase in New Apartments

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The latest report on housing shows that the number of new apartments has increased significantly this year, and there is still momentum in the construction industry this year.

According to data from the Housing Registry of the Housing and Construction Authority, the number of apartments under construction has remained relatively stable since the beginning of the year and is well above the historical peak, with over 7,000 units. The number of completed apartments has increased significantly in both the capital region and rural Iceland compared to the same time last year, according to the agency’s data.

Read More: 4,000 Apartments Needed to Meet Housing Demand

The number of apartments at the first stage of construction increased by 36% since last year, according to the latest Housing and Construction Authority census from March. Additionally, statistics from Statistics Iceland show that activity in the construction industry has continued to grow rapidly this year at a constant level. There are as of yet no clear signs that the number of apartments under construction has decreased, though these numbers could be affected by rising interest rates.

Despite the increase in the population, it appears that the number of residents per apartment has decreased from the years 2018-2020, hopefully indicating that construction has kept pace with population growth. The housing report states that there doesn’t seem to be a significant shortage of apartments compared to the previous decade. The report also indicates that authorities will continue to support the supply of apartments, including ongoing funding for the public housing system, as announced in June.

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PM Katrín Jakobsdóttir Condemns “Unacceptable” Practices by Landlords

In recent statement, PM Katrín Jakobsdóttir has condemned what she called “unacceptable” practices on behalf of Icelandic landlords and real estate companies.

Following her comments, work is expected to begin soon on reforming tenancy rights. MPs from the Left Greens, the Social Democratic Alliance, and the People’s Party have suggested that measures needed to be taken, potentially including a rent ceiling.

See also: Government Announces Increased Benefits

While Katrín did not specifically name any one real estate company, her comments follow recent news of one real estate company, Alma, raising rents by nearly a third in renewals for next year, potentially putting lower-income and fixed-income residents out on the street.

Katrín is quoted as saying: “I fully understand these demands in light of the recent conduct of some rental companies, which we have seen examples of in the media. Their conduct is completely unacceptable, as has been clearly stated. I have encouraged the rental companies to take responsibility and show moderation when they determine their rental prices in order to help us deal with inflation.”

Katrín and other ministers are expected to meet with members of the labour market in the coming days to discuss measures that can be taken.

Government Announces Increased Child and Housing Benefits

katrin jakobsdottir prime minister iceland

In the wake of the recently-concluded contract negotiations between VR and SA, the government has announced a series of measures aimed at supporting low- and middle-income households.

At a press conference at 14:30 today, Prime Minister Katrín Jakobsdóttir, alongside Minister of Finance Bjarni Benediktsson and Minister of Infrastructure Sigurður Ingi Jóhannsson, announced the new policies, which aim to support the buying-power of households, while keeping inflation rates down.

Improved Child Benefits

The child benefit system is to be simplified, while also increasing support for the system, allowing more to qualify for child benefits.

The improved child benefits will represent a total increase of ISK 5 billion from the current system over the next two years. Additionally, the system is to be streamlined to reduce the waiting time for child benefits, which are not to exceed four months after the birth of a child.

Changes in Housing

The government also plans to increase the housing supply by incentivizing the development of new real estate throughout the nation.

Increased access to social housing will also be a priority, with some ISK 4 billion to be allotted in 2023 to the expansion of affordable housing in Iceland.

Housing benefits for tenants will also be increased.

Additional reforms include improved pensions for the elderly and disabled, increased funding for workplace training, and reforms to pension funds.

Bundled along these concessions to Iceland’s cost-of-living crisis will also be a large increase to police funding.

Read the full announcement here.

In Focus: Indexed Mortgages

indexed mortgage iceland

Iceland’s housing market has undergone rapid changes over the past two years, with prices shooting upward. The market has begun to gradually cool, as a result of rising interest rates, with prices stalling or even slightly lowering in some cases. While there are multiple factors that affect housing prices – including availability and a pandemic-inspired […]

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Real Estate Market Slows, With Fewest Sales Since April 2015

apartments downtown Reykjavík housing

The Housing and Infrastructure Agency states in a recent report that the real estate market has slowed down significantly, with the lowest level of purchase agreements seen since April 2015.

The slow in sales is regarded as the first sign of a cooling off of a heated real estate market in Iceland, where property values have risen significantly in the last year.

Where previous months had seen steady price increases of 2 – 3%, the increase slowed to a more manageable 0.5% in June. As of June, some 53% of units across Iceland have sold above asking price, indicating both increased demand for housing, and shortage of supply. These forces have also driven up the average rent, which in June 2021 was around ISK 197,500, and now sits around ISK 207,000.

Interest rates have played a key role in the slowdown, but the supply of apartments in the capital region has increased more rapidly than expected in the month of August, with some 200 more units than expected. Neighboring municipalities of the capital area have also experienced a steady increase in housing supply.

35,000 Apartments to be Built in 10-Year Housing Plan

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State and municipal authorities reached a major agreement yesterday, July 12, in which they committed to expand the supply of housing by 35,000 units over the next 10 years.

The decision came in partial response to a working group formed last year, which highlighted the need for both social housing and affordable housing in Iceland. The working group emphasized the nearly-unprecedented explosion in housing costs over the last two years and the need to increase housing supply in order to insulate Icelanders, especially those with low income, from the effects of the real estate market.

The agreement is to run from 2023 to 2032, with a goal of 4,000 units a year for the first five years. Of these new units, 30% of them are to be affordable housing, and 5% are to be set aside as social housing, housing which municipalities have a legal obligation to provide to some qualifying individuals and families.

Sigurður Ingi Jóhannsson, Minister of Infrastructure, stated that a major goal of the new agreement is to protect residents from the large fluctuations that have characterized the last years. These fluctuations have especially impacted first-time homebuyers, who are having difficulty entering the market because of the ballooning prices.

The agreement also aims to streamline some aspects of housing development, including an increased emphasis on digital housing plans and bringing several other regulatory processes under one common framework.