föstudagur, febrúar 13, 2009

nobody's smilin'

Back at the end of last year, I wrote my first serious piece on "the Troubles" in Iceland. I had been saying since 2005 that there seemed to be too many new neighborhoods under construction around Reykjavík, and then there was some back-and-forth in the comments on whether or not that was so. Yesterday in Fréttablaðið (link PDF) , an economist at Landsbanki, Ari Skúlason, revealed the results of a summer 2008 survey the bank did of new construction in the area. The survey covers construction of apartment buildings and multi-family dwellings, but excludes single-family houses.

In the Reykjavík area (including the bedroom communities of Reykjanes, Selfoss/Hveragerði, and Akranes), there are 1,173 vacant, finished new apartments. Add to that 509 that are roofed and closed in (but not finished on the inside). And another 1,250 under construction and lots for another 4,403 reserved and/or prepared (some of them with digging for the foundation completed).

So the number of vacant finished apartments ain't all that bad for the area as a whole: just under 2% of the total number available today. But the number including "partially completed Death Stars" jumps to 8.4% of the total. That's a lot of ugly windowless concrete and half-dug lots.

The numbers get even scarier on an individual community level. The City of Reykjavík doesn't have proportionally all that many unfinished buildings, so it brings the averages down. But if you look at Kópavogur, where I live, more than 10% of total capacity is new/vacant or partially built. In nearby Garðabær and Hafnarfjörður, the numbers jump to over 18%! And up the street in the Mosó Ghett-ó a whopping 37.9% of the town is now empty or unbuilt construction.

I would like to see these numbers compared with vacancy rates on existing properties as well as rentals, to get a better overall picture. But I think it is safe to say that this vast unused capacity will pull aggregate house prices quite far off their pedestal, and keep them low for years to come.


Anonymous Paul H said...

Mosfellsbær has 37.9% vacant/unfinished property? Crikey.
So is any property actually selling in Iceland currently? Or has the market ground to a complete halt?

Blogger JB said...

Hey, those high numbers may have been a little misleading. In Mosó, for example, there was a high proportion of lots in the total figure. These might just be building lots set aside by the town and purchased by developers. They may revert back to the municipality now that new building starts have halted.

The chart reads: "Íbúðir í byggingu
og tilbúnar lóðir": 37.9%. That translates as "Apartments under construction and ready-to-build lots". Then there is another category "Fullbúnar og nær fullbúar íbúðir" - "Completed and nearly complete apartments", which for Mosfellsbær is only 1.9% of the total housing stock.

There is very little turnover these days. If you want to look at a cool interactive graph of housing turnover in the RVK Capital Area, go here and click on "Sjá allt grafið" in the graph. You can then see the turnover, in billions of ISK, for each week back to 2001. The red line is the 12-week moving average. Note how the housing crash began at the end of 2007, about 10 months before the banking crash. The banks already knew they were in trouble and just stopped lending at that point... so the signs were all there!


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