One out of every six househoulds must use more than half its income to pay off its loans. Seven percent should use 90% of its income to service their debt or roughly 5,000 homes. In addition twelwe thousand households are being heavily squeezed.
This was revealed at the Central Bank’s conference on the debt of Icelandic households.
On average each home owes triple its disposable income, but one home out of four owes five-fold of disposable income.
A curious note was made by the Central bank in that only 2,5% of homes are supposed to be both facing a heavy payment schedule and negative home equity.
I don’t understand the Central Bank or Johanna Sigurdardottir when they state that so few homes have negative home equity. Currently there is no active real-estate market in Iceland. More than 17.000 homes are listed but very few are selling. Those that are sold are usually when people are trading properties.
So as home equity suggests how much you’d get if you’d sell your house today, I dare say that the Central Bank and the Prime Minister are being awfully unrealistic with their statements. Unless you own your property outright, then you probably are facing negative home equity because no-one is buying and you are stuck.
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June 12th, 2009 → 8:27 am @ Dadi
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