Photo: Bjørn Giesenbauer/Flickr
“There is a shortage of housing and many young people have troubles making ends meet due to high rent.”
Those words could’ve been written about Toronto or Vancouver.
Yet they are from a recent article about real estate in Reykjavik, Iceland’s capital and home to roughly a third of the Nordic nation’s population.
Iceland, suggests British real estate consultancy Knight Frank, is also where you’ll find the fastest-rising home prices on the planet.
It’s one of only a handful of national housing markets outperforming Canada’s in terms of annual price growth.
Icelandic home prices grew by a world-leading 17.8 per cent annually as of this year’s first quarter, according to Knight Frank’s 55-market Global House Price Index Q1 2017.
The island nation also topped the index in the previous quarter.
A factor common to the national dialogue on fast-rising home prices in Toronto and Vancouver was said to be responsible for Iceland’s exuberance, too.
“A lack of supply is fueling price growth,” writes Kate Everett-Allen, Knight Frank’s head of international research, in a report on the index from this month.
By 2020, homebuilders in Iceland’s capital would need to complete 9,000 new apartments just to keep pace with demand, according to the report, which cites Iceland’s Housing Financing Fund projections.
Builders and economists have routinely cited insufficient supply, especially in the low-rise segment, as contributing to eroding affordability in the Greater Toronto Area and Greater Vancouver.
Photo: Bernard Spragg. NZ/Flickr
Hong Kong and New Zealand, which saw prices rise year-over-year by 14.4 per cent and 13.8 per cent respectively, are the other major markets where home values appreciated faster than they did in Canada last quarter.
Hong Kong, often named the most expensive housing market in the world, also faces supply challenges, but its market is quite unlike the others.
The government owns a majority of the land that can still be developed, and invites developers to bid on properties.
In New Zealand, a combination of immigration, low interest rates and a lack of supply are making the country’s market ever more unaffordable for the average buyer, the New Zealand Herald reports.
There is a 35 to 40 per cent chance New Zealand home prices fall by at least 5 per cent within the next two years, financial firm Goldman Sachs recently estimated, compared to a 30 per cent chance that happens in Canada.
This past quarter, Canadian home prices surged 13.5 per cent, according to the index, which is generally based on selling prices of all types of homes, although calculation methods aren’t consistent across all of Knight Frank’s global offices.
Canada appears to share something in common with Iceland, New Zealand and Hong Kong in terms of what’s causing stratospheric home price increases.
“The lack of supply and low interest rates have underpinned the market performance in Canada,” Knight Frank Senior Analyst Taimur Khan tells BuzzBuzzHome.
In all, 11 markets posted double-digit price gains in the first quarter, whereas just four did so at this time last year.
The overall index rose by 6.5 per cent last quarter, which is “its highest rate of growth for three years,” according to Knight Frank.
“Economic growth is one reason” for the appreciation, the report says. “Property’s reputation as a safe haven investment is another, along with the greater availability of mortgage finance in developing markets.”