3-Dec-2017 - Iceland (Reykjavik)
Charles Hector Whitmee
I am in the tremendously cold but equally beautiful Reykjavik this week looking at the real estate market across a number of sectors including the office, industrial and residential markets.
Few countries were hit as hard as Iceland by the economic crash of 2008 but, by the same token, none have bounced back so impressively either. The primary factor in this success has been the extraordinary number of tourists who now visit the country every year- over 2.2 million estimated for this year (up from 1.7 million in 2016), of which around 30% were from the USA. Almost every Icelander seems to attribute this to a different cause, including the rise in popularity of TV shows such as “Game of Thrones” and “Vikings.” Another theory is that following the infamous eruption of Eyjafjallajökull in 2010 the outside world began to see pictures of the “land of fire and ice” for the first time.
However, this rapid transition into a tourism centric economy has not been completely seamless and it’s obvious to see that the infrastructure is not suitably up to the task of dealing with the millions of visitors (especially considering that the population of Iceland is just 340,000). One proposal recently made by the government is to introduce a “visitor’s tax” whereby tourists will be required to pay an entry fee at the airport.
The booming economy has also greatly effected property prices across all sectors of the market. In fact, Iceland ranked number 1 in Knight Frank’s Global House Price Index” for 2017, above Hong Kong in second. Prime land in Reykjavik can be found selling at around ISK 300,000 per sq m (USD 2,874) but can go significantly higher depending on the area and zoning. The vast majority of new construction is for residential as the market seeks to redress the balance between supply and demand after years of inactivity following the crash.
Elsewhere, in the industrial and office markets, supply and demand are essentially at equilibrium and this trend is set to continue for the foreseeable future. Offices in the financial district let for around ISK 2,800 to ISK 3,000 per sq m/ month (USD 27- USD 29) but can drop to ISK 1,800 per sq m/ month (USD 17) as one looks further out of the city centre.
View from Borgatun to Hallgrimskirkja