Pandemic pushed prices up and down
The annual rental price increase in November stood at 1.4 percent above November 2019 levels, while the price of buying an apartment in a shared building was up seven percent. The annual rental price inflation figure was negative every month from January to May before increasing slightly last summer and into October. November’s rental prices were 0.7 percent higher than October’s, while data for December is not yet available.
The Landsbankinn report concludes that the pandemic affected the market in two significant ways that both reduced demand for rental housing and increased the number of properties available to rent. Both factors had the effect of keeping prices down.
Firstly, interest rates were cut to historic low levels to stimulate the economy. This made buying property easier and more attractive, thereby reducing demand for rented homes.
Secondly, the pandemic stopped almost all international tourism, and this led to a collapse in demand for Airbnb properties, many of which were put onto the general rental market instead, increasing the number of available properties.
The per-square-metre cost of renting a home went down in most individual neighbourhoods between November 2019 and November 2020. The rental price for a two-bedroom flat in Breiðholt went down by 30 percent and the cost of a similar home in Vesturbær (one of the most expensive districts) went down by nearly 20 percent.
"It can therefore be said that the rental market has been generally a lot quieter than the property market in the year just gone, and especially since the COVID-19 pandemic started,” the report states.