Icelandic news translated into English

November 4, 2008

Families are getting stuck in the chains of debt

Filed under: economy,families — newsfrettir @ 2:00 am

The real estate market is frozen. At the same time 7231 properties are being built across the country. Over ten thousand properties are listed for sale. Auðbjörg Ólafsdóttir from the analysis department of Glitnir says that it is clear that the properties values will lower by 25-30 percent. Sigurður Helgi Guðjónsson, chairman of the House owners Union, is scared that people will be stuck in the chains of debt.

Auðbjörg says it is clear that the situation today is as difficult as it gets. “There is nothing working with the real estate market at this time. Everything is working against it,” she says. Auðbjörg says it is obvious that there will be a minimum of 20 percent lowering in net worth of properties this year alone. It is also known that in the countries that have been through a crisis like Iceland is going through now the property value has dropped in value from 25 to 70 percent.

The biggest drop in value was in the Asian countries but Auðbjörg thinks it is unlikely that the value of properties here will drop that much. It is more likely that the evolvement will be similar to the bank crisis in the nordic countries where values dropped by 25 to 45 percent.

Sigurður Helgi Guðjónsson, chairman of the House owners Union, says he doesent know where this is headed. “This is just the calm before the storm, there is very little happening and home owners can barely feel whats really happening, but there is surge all around them,” says Sigurður. He says he has felt for a long time like the screamer in the desert trying to warn about the real estate price bubble.

Now it can be expected that the bubble will burst violently and values and prices drop severely. If the price lowers down below the amount of mortgages then everything will slide away from the mortgages. “People are going to get stuck in a debt and property owners chains. It will sit with debt and no property. In that situation there is no joy in existing,” says Sigurður.

(News Article by Ritstjórn DV)
Original Article in Icelandic

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