Property and Environment

Iceland’s house prices rises decelerating rapidly

Iceland’s housing market is now cooling, amidst slowing economy. Nationwide house prices rose by just 3.01% during 2018, a sharp slowdown from a y-o-y growth of 12.89% in the previous year. In fact in a quarterly basis, house prices actually dropped 0.29% in Q4 2018.

Iceland saw a housing boom from 2002 to 2007, with house prices surging by more than 73%. However house prices plunged by 32.5% from early-2008 to 2010, due to Iceland’s extreme exposure to the global crisis. The housing market was quiet during the next three years, with house prices rising a meagre 5%. Iceland then saw strong house price rises of 5.22% in 2014, 6.89% in 2015, 12.55% in 2016 and 12.89% during 2017, attributed to strong demand coupled with limited housing supply, especially in the capital city of Reykjavik.

Analysis: Housing boom is fuelled by strong tourism

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The continued increase in property demand in Iceland is fuelled by booming tourism. In 2018, foreign visitor arrivals to Iceland through the Keflavik Airport rose by 5.5% to more than 2.3 million people from a year earlier, according to Icelandic Tourism Board. Most tourists come from the United States (30%), the United Kingdom (12.9%), Germany (6%), Canada (4.3%), France (4.2%), Poland (3.9%) and China (3.9%).

Rents, rental yields: no reliable yields data

Recent news:  Iceland’s economy was estimated to have expanded by about 3.8% in 2018, a slowdown from expansions of 4% in 2017, 7.2% in 2016 and 4.1% in 2015, as the economy approaches full capacity. Economic growth is projected to slow further to 1.7% this year, the slowest pace since 2012, according to Statistics Iceland.

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Source: Global Property Guide

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