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Airbnb nation: 10% of Icelandic apartments listed on Airbnb: A major cause of rising home prices

By Staff

  • Þingholtin The view from Hallgrímskirkja church. Skólavörðustígurinn street and the Reykjavík harbour. Photo/Fréttablaðið

Travel rental has changed the Icelandic property market in dramatic fashion, new research by economists at the Icelandic Central Bank shows. According to the research nearly 10% of all apartments in Iceland were listed on Airbnb in 2017. In the past three years Airbnb has also contributed to the dramatic increase in real estate prices in Iceland, the study found. 

Read more: Small minority of Reykjavík residents feel Airbnb guests have a negative impact on city

A total of 8,162 hosts in Iceland have listed apartments or rooms on Airbnb since the travel rental site opened in Iceland. The total number of apartments in Iceland is 134,000. The study argues that since many hosts list more than one property Airbnbs actual share of the total housing supply is nearly 10%. The study also found that cumulative revenue from Airbnb rentals was 32 billion ISK at the end of 2017, which amounts to 1.3% of the GDP of Iceland.

Major impact on the housing market
The demand for Airbnbs has also affected the real estate market, the study finds. Real estate prices have risen dramatically in Iceland in recent years. The 12 month increase in January was 12.8%. Prices have risen by 70% in the past five years. 

The dramatic increase in housing prices can be explained partially by a bounce-back after the 2008 financial crash, which caused real estate prices to collapse. Rising wages and higher rental prices have also contributed to the increase: Wages have risen by 45% in the past five years, and rental prices by 50%. The remaining increase in housing prices can be explained by the shortage of housing, caused by rapid growth and immigration. 

However, a significant portion of the increase in real estate prices can be explained by Airbnb, the Central Bank study found. The study found that 15% of the increase in real estate prices in the past three years can be explained by demand for travel rentals by foreign visitors.

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