Reykjavík Grapevine - 13.04.2012, Qupperneq 20

“When we advertise an apartment for
rent, it’s gone two or three days later,”
Brandur Gunnarsson, a real estate
agent at Stakfell agency tells me. “We
continue getting inquiries about it for
the following two weeks, though. A
rental usually gets at least fifty to sixty
enquires.”
Another real estate agent, this
one working for Eignatorg, Björgvin
Guðjónsson, says that in his opinion the
rental market is very underdeveloped.
“When you find a flat to rent, it’s typi-
cally because it’s for sale or the owner
is not using it for a short period of time,”
he says. “So you regularly have to move,
and it’s difficult to find an apartment
that you could rent for ten years.”
In fact 56% of Icelanders say that
there are either few or very few rental
housing options that would suit their
family’s needs, according to a Capacent
poll conducted for the Housing Financ-
ing Fund (Íbúðalánasjóður) in October
2011.

A TEMpORARY OpTION
It has long been the government’s
policy to encourage home ownership
and the large majority of Icelanders
own their homes today. As a result, the
rental market is historically small and
has been seen as a temporary option.
While this wasn’t such a problem be-
fore the financial crisis of 2008, when
loans were given to just about anybody,
it has become increasingly evident that
the housing needs of a fair chunk of
people are not being met.
There appears to be a problem that
needs solving.
The Housing Financing Fund
(Íbúðalánasjóður, HFF) was founded
by the government to provide individu-
als with loans for the purchase, con-
struction and renovation of residential
housing in Iceland, or as its director
Sigurður Erlingsson puts it, “it’s a gov-
ernment agency with the task of mak-
ing sure Icelanders have a place to live.”
Sigurður confirms that there is increas-
ingly a demand for rental housing in the
greater Reykjavík area.
“Our polls show that crash or no
crash, people still want to own their
homes,” Sigurður says. “Icelanders are
quite individualist, and much like Amer-
icans, they pride themselves in owning
a home.”
However, it’s not that simple. The
post-crash reality is that not everybody
can afford to buy a home. “I think the
obvious reason is that there is a larger
group of people who, due to their fi-
nances, are not eligible to borrow mon-
ey,” he says. “We can see in our polls
that there is a direct connection be-
tween having a poor state of finances
and entering the rental market.”
In fact, 24% of all people applying
for a regular mortgage last year said
that they were denied, according to the
aforementioned Capacent poll. “That
was really surprising,” Sigurður says,
“and it supports the idea that there are
some people who need to rent because
they won’t be able to get a loan in the
next few years.”
HOMES FOR EVERYBODY!
Prior to the financial collapse, nearly
everybody was eligible to borrow mon-
ey. The game-changing year is 2004,
when recently privatised bank entity
Kaupþing began offering competitive
housing loans. Not only were they com-
petitive with the HFF, but they were also
“allowing up to 80% loan financing (as
opposed to the 70% limit applicable to
HFF at the time),” a July 18, 2011 EFTA
decision states.
This led the other two large private
banks to offer similar mortgages, which
in turn led the HFF to lower interest
rates on their mortgages and to lend
on a higher loan to value ratio, with the
HFF briefly offering up to 90% loan fi-
nancing.
Meanwhile, the banks were offering
up to 100% loan financing and in some
cases bank loans far exceeded property
value. A particularly glaring example is
a certain home in 101 Reykjavík, which
was advertised for auction with a debt
to Arion Bank (formerly Kaupþing) to-
talling 516.821.227 million ISK (around
4 million USD)—a property that had
been valued at 77 million ISK (around
600,000 USD) in March 2010.
In light of these developments,
housing prices skyrocketed—within
two years, apartment prices in the capi-
tal area had doubled.
pROBLEM?
In the wake of the 2008 financial cri-
sis, it turns out that the lending sys-
tem was problematic for a number of
reasons. First, loans pegged to foreign
currency—which have since been ruled
illegal—became up to two times as ex-
pensive due to the króna’s plummet.
Second, indexed loans—which make up
the bulk of the housing loans—became
A BLACK BOX
In post-collapse Iceland,
mortgages are hard to come by,
and a growing number of people are
turning to the rental market.
Yet, with such increased demand,
finding apartments to rent for
would-be tenants is only getting
more difficult.
So where are we supposed to live?
By Anna Andersen