Rent prices surge in Iceland as competition intensifies in rental market

Recent reports indicate that rent prices have surged significantly more than inflation in recent months, with the current disparity being unprecedented in the past seven years. This imbalance between supply and demand in the rental market is concerning, with approximately three prospective tenants competing for each available rental unit as of July.

A stark contrast exists between market rent and the average rent in the capital region, where a considerable portion of rental apartments is owned by non-profit rental companies. Currently, nearly half—47%—of the rental apartments in the capital are operated on social grounds. While market rents have rapidly increased in the area, the average rent has decreased, currently standing at approximately 233,000 Icelandic krónur. In comparison, the average market rent is around 275,000 krónur monthly.

In nearby regions, average rent tends to align closely with market rates, primarily because most rental properties in these areas are owned by for-profit companies—unlike the capital, where such properties make up only one-fifth of the total rental units.

Moreover, there has been a notable rise in corporate ownership of rental properties over the past two decades. In 2004, an overwhelming 72% of apartments were owned by individuals who possessed just one unit, but that figure has since decreased to about 61%. This statistic excludes properties in Grindavík, which were purchased by the real estate company Þórkötlu.