Iceland’s housing market has soared 56 percent since its 2009 crash.
But one of the island’s biggest property investors said there’s more to come, and is adding to its exposure.
“There is a growing demand, and the market is going to be supported by a lack of supply for the next few years,” said Gisli Haukksson cofounder and CEO of Gamma Capital Management Ltd., an investment fund that manages more than $1 billion in assets. He said lower interest rates will also help.
“Both real and nominal interest rates have been dropping quite fast in Iceland,” Haukksson said in an interview in Reykjavik. The central bank is due to announce its next rate decision on Wednesday. It cut the benchmark seven-day term-deposit rate by a quarter of a percentage point, to 4.25 percent, last month.
After its 2008 economic meltdown, real-house prices in Iceland fell by a third in the space of two years.
But the island’s meteoric recovery has drawn investors’ attention, especially since the central bank exited capital controls this year. After contracting about 7 percent in 2009, the economy grew more than 7 percent in 2016. Booms in tourism and construction are driving growth.
In the housing market, the central bank said Airbnb Inc. is helping drive prices higher. It recently cited a “surge in short-term private rentals,” with the number of listed flats in August up almost 65 percent from a year earlier.
The central bank said house prices are unlikely to drop as long as the lack of supply continues.
“The outlook is for a continued housing shortage for a while yet, although it could subside in the next two years,” it said last month. “Most signs indicate that demand will continue to grow, which will contribute to further price increases, other things being equal.”
Haukksson said Gamma has recently bought a developer for residential housing, and plans to build around 4,000 houses over the next half decade. He wants to list the company on the stock exchange next year.
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