{
  "title": "Iceland: Selected Issues",
  "publication": "IMF Staff Country Reports, June 27, 2022",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2022/06/27/iceland-selected-issues-519998",
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  "summary": "This Selected Issues paper on Iceland analyzes housing market risks and housing affordability. House prices in Iceland have increased markedly since the onset of the coronavirus disease-pandemic, with signs that the valuations have exceeded macro fundamentals and long-term trends.",
  "sections": [
    {
      "heading": "Summary and key findings",
      "content": "- This Selected Issues paper on Iceland analyzes housing market risks and housing affordability.\n- House prices in Iceland have increased markedly since the onset of the coronavirus disease-pandemic, with signs that the valuations have exceeded macro fundamentals and long-term trends.\n- Overvaluation has important implications for macroeconomic and financial stability, and housing affordability.\n- House price cycles seem to be closely linked with the business cycle, indicating an amplification risk in the event of price correction.\n- IMF’s quantitative analysis examines the interplay between house prices and related factors."
    },
    {
      "heading": "Analysis and outlook",
      "content": "- The ongoing monetary policy tightening cycle should help address Iceland’s house price pressures.\n- Further macroprudential tightening through binding and effective borrower-based measures could help contain systemic risks and create further buffers in the financial sector.\n- In the medium term, focusing on structural measures that reduce construction costs and increase supply by eliminating red-tape and reducing the period for obtaining building permits is likely to have the highest pay-off."
    },
    {
      "heading": "Policy recommendations",
      "content": "- Continue and calibrate monetary policy tightening to address house price pressures.\n- Implement further macroprudential tightening, prioritizing binding and effective borrower-based measures to contain systemic risks and enhance financial-sector buffers.\n- Pursue structural reforms to reduce construction costs and increase housing supply, including eliminating red-tape and reducing the period for obtaining building permits."
    },
    {
      "heading": "Subjects and keywords",
      "content": "- Subject: Environment, International organization, Monetary policy, National accounts, Prices, Taxes\n- Keywords: C. informing housing market policy, Carbon tax, D. containing housing market, Energy exchange transition, Global, Greenhouse gas emissions, Housing, housing affordability, Housing prices, I. carbon absorption\n\n---\n\n Content in this bundle\n\n- Iceland: Selected Issues; IMF Country Report No. 22/194; June 3, 2022\n  - Iceland: Selected Issues; IMF Country Report No. 22/194; June 3, 2022 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Iceland: Selected Issues; IMF Country Report No. 22/194; June 3, 2022 (PDF){rel=\"external\" type=\"application/pdf\"}"
    }
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    "Published: June 27, 2022",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9798400214608.002",
    "This Selected Issues paper on Iceland analyzes housing market risks and housing affordability.",
    "House prices in Iceland have increased markedly since the onset of the coronavirus disease-pandemic, with signs that the valuations have exceeded macro fundamentals and long-term trends.",
    "Overvaluation has important implications for macroeconomic and financial stability, and housing affordability.",
    "House price cycles seem to be closely linked with the business cycle, indicating an amplification risk in the event of price correction.",
    "IMF’s quantitative analysis examines the interplay between house prices and related factors.",
    "The ongoing monetary policy tightening cycle should help address Iceland’s house price pressures.",
    "Further macroprudential tightening through binding and effective borrower-based measures could help contain systemic risks and create further buffers in the financial sector.",
    "In the medium term, focusing on structural measures that reduce construction costs and increase supply by eliminating red-tape and reducing the period for obtaining building permits is likely to have the highest pay-off.",
    "Continue and calibrate monetary policy tightening to address house price pressures.",
    "Implement further macroprudential tightening, prioritizing binding and effective borrower-based measures to contain systemic risks and enhance financial-sector buffers.",
    "Pursue structural reforms to reduce construction costs and increase housing supply, including eliminating red-tape and reducing the period for obtaining building permits.",
    "Subject: Environment, International organization, Monetary policy, National accounts, Prices, Taxes",
    "Keywords: C. informing housing market policy, Carbon tax, D. containing housing market, Energy exchange transition, Global, Greenhouse gas emissions, Housing, housing affordability, Housing prices, I. carbon absorption",
    "**Iceland: Selected Issues; IMF Country Report No. 22/194; June 3, 2022**"
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