Significant rise in housing prices in April in Reykjavik | Cross River Homes

Reykjavik City

Housing prices in the greater Reykjavak area rose by 0.7% in April. This is the highest monthly rise in the index since October of last year, when housing prices rose by 0.9% between months.

 There can be a great deal of volatility in these figures between months and it is therefore more helpful to look at longer-term trends to form some picture of where the market is headed. Over the past twelve months, housing prices have risen by 5.5% and this is similar to the 12-month rate of increase witnessed last month. In real terms, however, i.e. taking inflation into account, housing prices in the greater Reykjavík area have risen by 2.2% during this period. This is the highest real increase recorded since August of last year, and it has risen further recently, as a result of slowing inflation. The housing price index for the greater Reykjavik area was published by the Icelandic Property Registry yesterday.

Turnover has continued to rise

In parallel with the rise in housing prices in the greater Reykjavík area, the turnover in the housing market has also been increasing lately. In April, the turnover was 49% greater than in the same month last year, and this was the highest turnover recorded since April 2008. There were 36% more sale/purchase agreements notarised than in the same month last year. Looking at the development of the past six months, the turnover was 27% greater than in the same period last year. 17% more agreements were notarised during the period than in the same period last year. One can say that the turnover in this market has risen almost uninterruptedly since 2009.

Considerable rise in nominal value, but only slight rise in real value

Housing prices in the greater Reykjavik area have increased by 16.9% since they were at their lowest at the end of 2010. One now has to go back to October 2007 to find higher housing prices in this area, since it was during those months that property prices were at their peak before the crash. However, the price increases that have occurred since the end of 2010 have largely been eroded away by inflation and the real value of housing has only risen by 4.1% during this period. The real value is therefore still over 33% lower than it was when property prices were at their peak before the crash in October 2007. In drawing this comparison, however, one has to bear in mind that in 2007 there was a big property bubble in the Icelandic market and it would therefore be more appropriate to compare current prices with real prices over a longer period. Thus the real value of housing now is not particularly low, historically speaking. It can also be said that, although the real increase since the end of 2010 may not have been very high, an increase did nevertheless occur and this has been founded on the improved financial position of households, which have both increased their disposable income during this period and lowered their debt levels.

Significant rise in housing prices in April in Reykjavik