Empty luxury apartments dot the capital of Iceland as slowdowns

The economy cools quickly after the end of the tourism boom; the central bank governor is raising house bubble concerns

The spacious entrance to the Haraldsdottir building of Hildigunnur in downtown Reykjavik is paved with a Prague marble and decorated with a local artist's stained glass artwork. houses

The fifth floor of the architect's apartment is equipped with floor heating, AEG equipment and balconies overlooking the city harbor and historic centre.

The flat is one of 38 she designed for her company T13 ehf and was co-financed by Landsbankinn, the largest bank in Iceland. Since they hit the market more than a year ago, only 20 were sold.

"We have reduced our prices and cannot reduce them further, as the prices are now lower than the building costs," said Ms Haraldsdottir in an interview with Reykjavik.

The history of Iceland's booms and bustes shows how likely the nation can be to overflow.

While hundreds of new luxurious apartments remain empty, lack of affordable housing (a recent government report states that about 8,000 households are needed to address the shortage) continues to fuel widespread resentment and poison wage talks between trade unions and employers.

It has now been more than 10 years since Iceland plunged into its worst financial crisis in recent history, and it is practically over.

Most capital controls that were introduced following the collapse of the banks were lifted and unemployment was low for 10 years.

Iceland's debt to disposable income, after years of strong growth driven by record-breaking tourist receipts, is at 151 per cent the lowest in the Nordic Region, whilst the gross domestic product per capita is 30 per cent more than the European Union average, according to the national statistical office.

Like in Sweden, Denmark and Norway, the historically low mortgage rate is a fizzy housing market in Iceland.

The prices of new apartments - which tend to fit in with the category Luxury - increased by 17 percent from October 2017 to October 2018, compared to a general increase in home prices, according to the Housing Financial Fund, of 3 percent over the same period. A fantastic new apartment in the center can now cost US$7,000 per square metre.

The boom in the property has stimulated lending. Short-term loans to property and construction companies go back to pre-crisis levels, which are now one fifth of the central bank data for the commercial bank's loan portfolio.

Ms Haraldsdottir and her business partners might be wrong, like others in the business. A recent Arion Bank report suggests that the housing market is rising, with 'expectations of increasing supply' contributing to 'moderate price increases.'

At the same time, Iceland's economy is showing signs that a tourism boom is slowing down. According to Isavia Airport Operator, total tourist numbers are expected to fall by 2.4% from the peak last year.

The central bank forecasts 1.8 percent growth this year, the slower rate since 2012, and approximately one percentage point below its November 2018 forecast.

Although the country's airlines are already feeling the impact, tourism will also slow down, which will weaken short-term demand for Airbnb customers.

In the meantime, wealthy expats from Iceland who had taken advantage of a weak crown to purchase properties now face currency reinforcement.

Mar Gudmundsson, the central bank governor, insisted he's not worried about the immobiliary market mismatches. But Asgeir Jonsson, a University of Iceland economist, said people like Ms Haraldsdottir should be concerned.

"The contractors have catered to the luxury market, which now seems more or less saturated," he noted, adding that if the price of high-end apartments would fall even further, he would not be surprised.

Island — Iceland Steam and lava spurdled a new fissure on the Icelandic volcano Monday that began to erupt last month, causing the spectacle to evacuate hundreds of walkers.

The new split, first detected by a sightseeing helicopter, was 500 meters in length and approximately one mile (about a half mile) from the original splash site in the Geldinga Valley.

The Icelandic Emergency Management Department announced that the area would be evacuated immediately. It said that there was no immediate danger to life because of the distance from the site for popular walking paths.

The Icelandic Meteorological Office has said that the new volcanic activity in the neighboring airport of Keflavik will not affect transport.

The long-sleeping volcano on the southwestern Reykjanes peninsula came to life on March 20 after tens of thousands of earthquakes in the region in the last three weeks. It was the first volcanic eruption in the region in almost 800 years.

The volcano, which is near the capital of Iceland, Reykjavík, approximately 32 kilometers away, has brought a steady stream, including the country in a partial lockdown to fight against coronaviruses. According to the Icelandic Tourist Board, around 30,000 people have visited the area since the eruption began.

Live footage from the area revealed small lava spouts from the new crack.

Geophysicist Magnus Gudmundsson said that the volcanic eruption could move north.

"We are now seeing less lava from the two original craters," the Associated Press said. "This might be the start of the second stage."

Island, overlooking a North Atlantic volcanic hot spot, averages one volcanic eruption every 4 to 5 years. The last one was at Holuhraun in 2014, when a fissure eruption spread lava over the inner highlands of Manhattan.

In 2010, ash was shut down for a few days from Eyjafjallajokull volcano in Iceland.

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