Iceland may have recovered from a debilitating financial crisis, but now it faces a new problem: an increasing number of empty luxury apartments and a need for affordable housing.
A booming housing market and low mortgage rates have pushed up the prices of luxury property in cities like Reykjavik, Bloomberg reported, but now many units are being left empty as the economy cools.
The number of tourists expected to arrive this year is slated to drop nearly 3 percent while the country’s economic growth is forecasted to cool to 1.8 percent, the slowest pace in more than five years.
A recent report by Arion Bank, cited by Bloomberg, suggests the country’s housing market will follow suit with “expectations of increased supply” moderating price growth.
“We have lowered our prices and can’t lower them further, since the price is now lower than the cost of building,” architect Hildigunnur Haraldsdottir told the outlet on trying to move 15 units in her brand new luxury condo that have sat on the market for a year and counting.
The slowdown comes after the price of new luxury apartments in Iceland rose 17 percent between October 2017 and 2018, compared to a rise of 3 percent in general property prices over the same period, according to the report. Meanwhile, the Icelandic government recently released a report saying 8,000 homes are needed to fill the demand for affordable housing in the country.
In 2017, Iceland saw the largest growth in property prices of any country in the world, according to Knight Frank’s Global House Price Index. That year, property prices in the country rose by 15 percent, compared to an average global increase of 4.6 percent. [Bloomberg] – Decca Muldowney