In the past twelve months, house prices nationwide have soared 16%, according to SI data, with single-family homes in greater Reykjavík up nearly 20%, housing in regional Iceland up nearly 16%, and capital area condominium prices up 15%. Therefore, by this measure, the pace of house price inflation is still accelerating and is now at its fastest in four years.
It should be borne in mind, though, that SI measurements show with a lag. Data underlying the November measurement, for instance, cover purchase agreements registered in August-October, and in some cases they capture transactions taking place even earlier in the year. Although there are no signs as yet that recent policy rate hikes and borrower-based measures adopted by the Central Bank (CBI) have begun to bite, the effects could come to the fore in the next few months.
Other upward-pushing CPI items
Apart from the housing component, the travel and transport component increased the most in November. It rose by 0.6% (0.08% CPI effect), as motor vehicle operating expense rose by 0.6% (0.08%), including a 1.9% (0.06%) increase in the price of petrol and oils. Petrol prices are up more than 20% in 2021 to date, driven by surging global fuel prices.
The air travel component remained flat MoM, although closer scrutiny shows that international airfares fell 1% MoM. This did not affect the index as a whole, however. International airfares have fallen by 13% since August, when the Delta variant of the virus began to spread in earnest. We had forecast that airfares would rise in November, but we have found them exceedingly difficult to predict ever since the pandemic struck.
Other upward-pushing items were furniture and housewares, up 0.9% (0.06%), and food and beverages, up 0.2% (0.03%). We consider it likely that these items have risen in price because of price hikes abroad and increased transport costs.