Reykjavík Economics report on the housing market
According to a new report on the capital area housing market, prepared by Reykjavík Economics for Íslandsbanki, house prices rose by 19% in real terms from March 2016 until March 2017. Single-family homes rose in price by 18.2% over the same period and condominiums by 19.3%.
The highest average price per square metre is in the city centrum, north of Hringbraut, at 469,000 kr. in 2016. The largest proportional increase among Reykjavík neighbourhoods was in Hólahverfi, at 19%, followed by Seljahverfi, with 18%. Of the capital area communities outside the City of Reykjavík, Seltjarnarnes has the highest price per square metre, at 437,000 kr. House prices in Seltjarnarnes also rose proportionally the most in 2016, or by 24%.
A large group of young people are about to enter the housing market, according to the report, and the number of first-time buyers is on the rise. The average age of this group is 32 years. Population growth and net migration also boost demand for housing. In the rental market, prices rose by 10.3% between March 2016 and March 2017, and the number of leases fell over the same period. Rent rose by 68.1% from the beginning of 2011 through end-December 2016, whereas the general price level rose by 21.1% over the same period.
According to the report, declining unemployment and stronger foundations for household income generation have shored up the residential housing market, and it is easier than before to estimate future income.
Una Steinsdóttir, Director of Retail Banking:
“At Íslandsbanki, we place strong emphasis on in-depth professional analysis of the housing market, both from our own experts and through external collaboration, such as with Magnús Árni at Reykjavik Economics. The group we have followed most closely is the large cohort of young people entering the housing market with the purchase of their first home. Several years ago, Íslandsbanki adapted its service offerings to reflect analysis of young people’s position and needs. As is stated in Magnús’ report, there are uncertainties ahead because of the surge in house prices over the past few years, and it is therefore vital to encourage young buyers to be careful and seek advice from experienced specialists such as those at all of Íslandsbanki’s branches.”