Leigureiknir

Premises

The organization aims at the price of real estate according to the information of the National Register of Real Estate and the financing of purchases at that price. On top of financing and subsidizing loans, 0.18% property taxes and 1.1% maintenance costs are added to the annual rent, and 2.5% default insurance and 2.0% administration fee are added to the rent.

It is based on the market value of housing in 2020 and the rent is then adjusted to the price level in November 2021. The reference price is an average and is based on an average apartment in an apartment building. If an apartment has great advantages, the price fluctuates up and down in the same way if the apartment is in a basement, poorly organized or has other deficiencies. Three criteria are issued: Non-profit-driven rent:

This is based on a 20% equity contribution and an indexed 80% loan for 99 years at an interest rate of 1.69%, but that was the interest rate in the last auction of Social Housing. The loan term is based on the minimum lifetime of houses and not the loan term of general housing loans for individuals. The parties that should be able to guarantee this price are municipalities, trade unions, non-governmental organizations and others who can offer guarantees for loans beyond the real estate itself.

Although this level is non-profit driven, property is created within these companies because real estate prices rise more than the general price level. The associations will therefore be able to build more apartments over time or lower the rent. The tenants' association does not publish reference prices for rental companies that are fully funded and run by the pension funds, but it can be expected that their rents should be significantly lower than non-profit-run rents that require loans to build or buy apartments. Market rent:

Here are the same assumptions as in non-profit-driven rent, except that 2.5% interest is calculated on a 99-year loan for 80% of the property's value. The parties to which this applies are cooperatives, public organizations and private institutions, which do not have sponsors who can guarantee even better credit terms, and private companies looking for a long-term investment with a small but safe return.

Within these companies, there will be fairly rapid asset formation, even if the rental income appears to be more than covering the installments, interest, maintenance and operation. These companies can therefore grow steadily by buying new properties as the mortgage eligibility of older apartments increases, unless they choose to let tenants benefit from an increase in property prices above the general price level. Usury limit:

Here, the same assumptions are used as in the previous criteria, the interest rate is 2.5% as in market rent, but here the loan period is only 40 years and it is calculated that the rent will pay off the loan during that time. Tenants therefore buy the apartment from the landlord several times during the life of the building.

This is a reference price that would apply to individuals and companies with weak credit, entities that really have no business entering the housing market. It is the association's belief that with the development of a normal housing market, these parties will gradually disappear from the market.

Different prices depending on the neighborhood

The benchmark price reflects different prices depending on the neighborhood in the same way that the purchase price of apartments is different. If we take an example of a 60 square meter two-room apartment, the non-profit-driven price in Vesturbæn is ISK 125,500. in Vesturbæn but ISK 88,500. in Breiðholt. The usury limits are also different; 195,000 ISK in Vesturbæn but ISK 137,500. in Breiðholt. The other districts then arrange themselves in between; The center is a little cheaper than Vesturbærin and Árbær/Norðlingaholt and Grafavogur/Grafarholt midway between Vesturbær and Breiðholt.

In general, the conclusion of the Tenants' Association is that rent is far too high and far exceeds the landlord's actual costs. The association's standard is a solid market with patient money, but the reality is that this is a market where the majority of landlords are tempted to draw in a large profit in a short time, not only in the form of an increase in property prices above the price level, but also a significant surplus from operations and installments.

Since real estate prices are higher in Vesturborg and the rental price is generally around and above what ordinary people can pay, the difference between the purchase price and the rental price is smaller there than in the upper areas of the city. The person who buys an apartment to rent out in Breiðholt will therefore receive a higher return than the person who does the same in Vesturborginn, unless the value of apartments in Vesturborginn increases much more than the increase in apartments in Breiðholt. Also, a higher increase in housing prices offsets a smaller surplus from operations and loan repayments. Here you can see even more explanations on the Leigureinik database.