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.

Cost of Living in Iceland

Last updated in Nov. 2022. The original question is from Dec. 2015.

Q: I’ve recently been offered a job in Iceland and have been looking into the cost of living, which is quite high compared to many other European countries. Is a salary of ISK 700,000 (USD 4,800, EUR 4,600) a month enough to cover the basics?

Derek, Ireland.

A: According to Iceland Statistics, the average salary in Iceland is ISK 635,000 (US 4,370, EUR 4,200) before tax per month, so the offer you received is well above that. Income tax is 31.45% for income up to ISK 370,482. For income in the range ISK 370,483 to ISK 1,040,106, the tax is 37.95%, and for income above ISK 1,040,106, the tax is 46.25%. The personal tax-free allowance is ISK 53,916 monthly or ISK 646,993 annually. For more on taxation, visit skatturinn.is.

The average rent for a centrally located one-bedroom apartment in Reykjavík is ISK 185,000 (USD 1,270, EUR 1,220) per month. This website offers information on the cost of renting an apartment. The figures show the price per square meter in various parts of the country.

A single person can expect to spend ISK 195,000 (USD 1,340, EUR 1,290) a month on food, clothes, medical services, recreation, transport, communication, and other services. For comparable figures for families check this website.

Here is the website of Statistics Iceland that shows average household expenditure.

Based on these figures, you can accept the job offer, knowing that you’ll have more money to spare than the average person in Iceland.

VH

What is the best site or way to find house rentals in Iceland?

The answer below has been updated in Nov. 2022 to better reflect the current situation but the original question is from 2012.

Q: What is the best site or way to find house rentals in Iceland? Long and short term?

Kim Bohon, Iceland (originally from Burleson, Texas, USA)

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A: The rental market in Reykjavík is difficult for renters; the selection is sparse and available apartments sought after, especially in the city center and surrounding neighborhoods, and the price is rather high.

For example, a 80 to 100-square-meter apartment with two to three bedrooms in an apartment complex in postal code 105 Reykjavík, could be rented for approx. ISK 280,000 (USD 1,945, EUR 1,870) monthly, while a 60-square meter apartment with one bedroom in an apartment complex in the suburb Grafarvogur, 112 Reykjavík, went for ISK 240,000 (USD 1,670, EUR 1,600) per month, as stated on mbl.is. (Numbers as of Nov. 2022.)

On leigulistinn.is, a 10-square meter room in Torfufell in 111 Reykjavík was advertised for ISK 80,000 (USD 560, EUR 530) per month, while a 12-square-meter room on Hringbraut, in Vesturbær 101 Reykjavík, was rented for ISK 120,000 (USD 830, EUR 800) monthly (Numbers as of 2011).

The main three websites with information on rental apartments in Reykjavík are Leigulistinn, Leiga.is and news website mbl.is under properties (“Leigueignir”).

For the first two websites you might be able to receive help via email: [email protected] and [email protected], but please note that on Leigulistinn you have to pay a small fee for using the website. In the ads on mbl.is, telephone numbers and emails are usually included (if you’re calling from abroad, dial +354 first).

Rent tends to be lower outside the capital region and in smaller towns but not necessarily.

There are several Facebook groups where rental housing is listed and where you can post about what you are looking for. ‘Leiga‘ (e. Rental) is the biggest of those groups, other groups include ‘Leiga á Íslandi / Rent in Iceland‘, ‘Leiga í Reykjavik – Rent in Reykjavik‘ (focus on accommodation in Reykjavik) and ‘Leiga 101 Reykjavík‘ (rental housing in downtown Reykjavík only, postal code 101).

As for short-term rental accommodation, holiday apartments or cottages, there are a few websites you can check out.

In Reykjavík, there is for example airbnb.com, and in Akureyri in the north, there is a range of options presented by Visit North Iceland.

For summer houses around the country, viatis.is has a good selection.

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.

Eurostat: House Prices Risen Most Sharply in Iceland Since 2010

architecture downtown Reykjavík houses square

According to a new report by Eurostat, house prices have risen most sharply in Iceland over the past decade when compared to other European countries. Between 2010 and the first quarter of 2021, house prices in Iceland increased by ca. 140% and the cost of rent rose by almost 70%.

Estonia the only country that compares

Yesterday, Eurostat, the statistical office of the European Union, released a new report on the prices of homes and the cost of rent within the EU (and among members of EFTA). The report indicates that house prices have risen most sharply in Iceland compared to other European countries, or approximately 140% between 2010 and the first quarter of 2021. The cost of rent in Iceland has risen by almost 70% over the same period. Compare this to the building-cost index, which has increased by approximately 57% since 2010. The consume-price index has remained relatively stable.

The only other European country that has seen a similar increase in the prices of homes is Estonia, where cost has risen by approximately 130%. In Sweden and Norway, house prices have increased by 80% compared to ca. 50% in Denmark. The average rise in house prices over the past decade in Europe is approximately 35%. Only four countries have seen homes decrease in value over the past decade: Greece, Italy, Spain, and Cyprus.

The cost of rent has generally seen a more minor increase in Europe over the past decade, when compared to house prices, or approximately 15%. In a few countries, however, rent has risen faster than the cost of homes, e.g. in Finland, Ireland, and Lithuania. In Norway, Sweden, and Denmark, the increase in the cost of rent is much lower than in Iceland, or approximately 20%.

Interest rates raised and mortgage regulations tightened

Iceland Review reported on Wednesday that the Central Bank had raised key interest rates by 0.25%, bringing the rate to 1.5%. This change marked the Bank’s third interest rate hike since May, indicating a shift in direction as the economic forecast has improved.

Throughout last year, the bank’s Monetary Policy Committee (MPC) consistently lowered interest rates in response to the pandemic recession but now says it expects the domestic economic recovery to continue. The Central Bank’s key interest rate reached a historic low of 0.75% in November last year. In comparison, rates in January 2020 stood at 3% and in January 2019 at 4.5%.

The Central Bank also tightened mortgage regulations at the end of September, stating that rising real estate prices had “gone hand-in-hand with increased household debt.” The move, which entails instituting a maximum debt-to-service ratio of 35% for borrowers (40% for first-time buyers) is intended to support stability in the housing market.

May put some families in a “tight spot”

As reported this summer, this increase in key interest rates will likely have the most significant impact on those who signed non-indexed mortgages with variable interest rates. A report from Landsbankinn this summer demonstrated a 1% increase in variable interest rates for a non-indexed mortgage of ISK 30 million could result in an ISK 25,000 rise in monthly payments.

Read more about Iceland’s housing market below:

Major Rent Decrease for Bjarg Tenants

apartments downtown Reykjavík housing

The Bjarg íbúðafélag housing association will be lowering the rent for a number of tenants by as much as ISK 35,000 [$280, €238] a month, RÚV reports. The rent decrease will go into effect on September 1.

Established by the Icelandic Confederation of Labour (ASÍ) and the Federation of State and Municipal Employees (BSRB), Bjarg is a not-for-profit foundation that aims to provide affordable, long-term housing for low-income families and tenants. According to new data collected by the Housing and Construction Authority, once the decrease goes into effect, rent paid by Bjarg’s tenants will be 20% cheaper than rent on the general housing market.

Bjarg has credited a recent government decision to grant favorable, long-term refinancing on the loans it received from the Housing and Construction Authority. The new lending terms will apply to loans that go toward the construction and purchase of apartments for the social good, such as in the case of a nonprofit like Bjarg. A letter of intent outlining this decision was co-signed by Minister of Social Affairs and Children Ásmundur Einar Daðason, Bjarg CEO Björn Traustason, and Housing and Construction Authority Assistant Director Anna Guðmunda Ingvarsdóttir.

Bjarg made its first apartment available two years ago and now rents around 500 units. Björn says that the foundation expects to have as many as 1,000 apartments within a few years.

The rent decrease is expected to put pressure on other apartment associations to lower their rents as well, Ásmundur Einar remarked to Vísir. “I’ve no doubt it will. This is the first time that we’ve had lower interest rates passed directly down to tenants. This is what happens with companies like Bjarg, which ensures that all profits go straight to the lessee and not to the landlords.”

Decline in Tourism Leads to Lower Rates on Rental Market, Temporarily

Reykjavik from above

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.”

Offer Reykjavík Renters Seven-Year Fixed Contracts

Reykjavik from above

A major leasing company is now offering Reykjavík renters seven-year fixed-price contracts, RÚV reports. Almenna leigufélagið, which manages some 1,200 rental properties in Reykjavík and other parts of the country, is now offering renters a new type of contract with a fixed rental price, tied only to the consumer price index.

The new type of lease is being marketed under the trademark Alma. While contracts will be signed for one year at a time, the tenant will have the unilateral right to extend the agreement for another year. Tenants can extend the contract six times for a total rental period of seven years.

The high cost of housing, particularly for renters, has been key topic in ongoing wage negotiations between unions and the Icelandic Confederation of Enterprise (SA). Almenna leigufélagið recently pulled back a planned general rent increase following a meeting with VR Union.