The Central Bank of Iceland has warned that the lengthy sales period for new apartments suggests they may be overpriced.
According to the bank’s Monetary Policy Committee, purchase agreements for newly built housing have dropped sharply this year. Supposedly, some sales have been strung out for over more than a year.
As reported by Iceland’s national broadcaster, RÚV, figures for June show that the average sales period for all apartments was 5.5 months. This is up from three months a year earlier.
New but unwanted
For new builds, the average sales time is far longer at 17 months.
And yet, the number of homes on the market has also surged. There were around 4,800 available to purchase in July in total, nearly 1,900 of them newly built.
Nationwide, property purchase agreements have fallen by more than 20% this year. For new construction alone, the decline is more than double, at 42%.
Factors at play
Despite this slowdown, housing prices were still 4.7% higher in June than a year earlier. With that said, the pace of increases has eased since January, when annual growth peaked at 10.4%.
However, Housing and Construction Authority economist Jónas Atli Gunnarsson argued there may be other factors behind the trend.
“Maybe with fewer parking spaces and then there are lighting conditions that could be somewhat poorer in new apartments. It could also be that buyers of new apartments are afraid of building defects. Because the discussion about building defects has been a bit prominent in recent months,” he said.
Source: Icelandreview.com
