Icelandic households are in a strong financial position, according to analysis by the Central Bank of Iceland. Household debt has increased on par with economic growth for the past two years, after having shrunk each year since the 2008 crash.
The most recent issue of the bi-annual Financial Stability report (pdf) by the Central Bank points out that while mortgage debt has increased during the past two years, this increase has been offset by a drop in other household debt. This suggests that rising real-estate prices are the main reason debt has not continued to drop.
Read more: Household finances continue to improve, but number of homes in arrears still above EU average
Despite the increase in mortgage debt the loan to value ratio of mortgages has continued to drop, standing at 29.7% at the end of 2017. Rising real-estate prices and high savings rate of recent years has allowed the net assets of Icelandic households to increase rapidly in the past three years, as the purchasing power of wages has grown.
Other indicators paint a similar picture. Fewer Icelandic homes have negative equity and the number of personal bankruptcies has continued to drop, as well as the number of people in arrears on their loan payments.
Read more: Ask the expert: How much does it cost to rent in Reykjavík? (Hint: it's not cheap!)
However, higher real estate prices have also pushed a growing number of Icelanders out of the housing market. The share of people living in owner occupied dwellings has dropped by six percentage points in the past decade, down from 64% to 58%.
Icelandic households are in a strong financial position, according to analysis by the Central Bank of Iceland. Household debt has increased on par with economic growth for the past two years, after having shrunk each year since the 2008 crash.
The most recent issue of the bi-annual Financial Stability report (pdf) by the Central Bank points out that while mortgage debt has increased during the past two years, this increase has been offset by a drop in other household debt. This suggests that rising real-estate prices are the main reason debt has not continued to drop.
Read more: Household finances continue to improve, but number of homes in arrears still above EU average
Despite the increase in mortgage debt the loan to value ratio of mortgages has continued to drop, standing at 29.7% at the end of 2017. Rising real-estate prices and high savings rate of recent years has allowed the net assets of Icelandic households to increase rapidly in the past three years, as the purchasing power of wages has grown.
Other indicators paint a similar picture. Fewer Icelandic homes have negative equity and the number of personal bankruptcies has continued to drop, as well as the number of people in arrears on their loan payments.
Read more: Ask the expert: How much does it cost to rent in Reykjavík? (Hint: it's not cheap!)
However, higher real estate prices have also pushed a growing number of Icelanders out of the housing market. The share of people living in owner occupied dwellings has dropped by six percentage points in the past decade, down from 64% to 58%.
