Huge differences in house prices

A residential house in Tórshavn costs, on average, DKK 1.5 million more than an equivalent house outside the capital.

A new report from the Governmental Bank of the Faroe Islands shows that 25 percent of houses sold in Tórshavn in 2018 went for more than DKK 3 million.

Prices of rental properties have also gone up and are now slightly higher per square metre than for residential properties.

Despite the massive house price gap in Tórshavn and elsewhere in the country, prices in the larger towns are also on a steep incline, with the average price rising from DKK 1,065m to DKK 1,338m in the 2017-2018 period.

According to Malan Johansen, the CEO of the Governmental Bank, the reason for the price hike in the larger towns is the lack of housing supplies in the capital.

Towns defined as ‘large towns’ in this context are: Fuglafjørður, Glyvrar, Klaksvík, Kollafjørður, Leirvík, Miðvágur, Nes (Eysturoy), Norðagøta, Runavík, Saltangará, Saltnes, Sandavágur, Strendur, Sørvágur, Toftir and Vestmanna.

In Suðuroy and Sandoynni house prices have gone down in recent years. The report also shows that house prices are rising faster than wages. This may be an indication of excessive optimism in the housing market. The report authors argue that expectations of continued house price increases, along with favourable loan conditions and a general housing shortage in the capital encourage buyers to offer unreasonably high prices.

This can easily become burdensome as buyers commit to higher debts than they can manage, but Johansen insists that this is not a sign of a crisis.

Translated by prosa.fo