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Property prices and demand still soar

04.12.2020 - 15:49
 Mynd: RÚV
The average property price has risen by five percent since this May. Demand for housing is high and the supply of homes on the market has shrunk rapidly. This development is the subject of a new report from the housing and infrastructure agency.

According to the short-term index of the agency's economics department, the supply of homes for sale has dropped the most in the capital region. Since the end of May this year, the selection of housing for sale has shrunk by 41 percent, and by 36 percent in East Iceland and 29 percent in West Iceland.

While supply has been shrinking, demand has been extremely high. The number of notarised purchase contracts this September was the highest since 2007. The average price is up five percent since May and the time taken to sell the average property is much shorter.

The report says the construction industry has seen a rapid slowdown. At the start of last year, construction industry turnover was dialled back. "Based on the latest numbers, covering July and August 2020, the annually-adjusted turnover had reduced by 15 percent since the start of 2019. Additionally, the nujmber of people employed in the building trade and infrastructure construction reduced by ten percent between August 2019 and August 2020."

The report notes, however, that the number of people in construction now is still at a near-ten-year high and that the pace of construction is still very fast in a historical context.

The reduction is most pronounced in first-stage buildings, which means that the number of empty-but-weather-proof buildings has gone down more than those that are ready for fixtures and fittings, or those that are ready to move into. This means that the market should expect even fewer new homes to go on the market in the future. The number of weather-proof buildings moving into the second stage of construction in the capital is down 41 percent between years, which is the biggest drop since 2010-2011.

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