Biggest property price increase in three years
“We saw the price of homes rise by 1.2 percent between months in July in the capital, which is the biggest rise we have seen between months since May 2017,” says Una Jónsdóttir, an economist with Landsbankinn.
Central Bank of Iceland figures confirm that the property market is strong; showing a 45 billion króna increase in new mortgages in July. Nearly all the new loans are non-inflation-indexed. The market is driven by record low interest rates that households have been using for upgrades or refinancing.
Íbúðalánasjóður, the Housing Finance Fund, reports that the proportion of first-time buyers has never been higher, homes are on the market for less time, and rental prices are going up.
How long this will continue is unclear, but there are no warning signs of a property price bubble at this time, according to Una.
There is great economic uncertainty thanks to the international coronavirus crisis, however, and unemployment is expected to rise in the autumn. “That might cause these increases to slow down somewhat, meaning it will not continue in the long-term,” Una speculates.