Working paper no. 76: The effects of Airbnb on the residential housing market

Rannsóknarritgerð 76

The Central Bank of Iceland has published a new working paper on the effects of Airbnb on the residential housing market.

In recent years residential apartments have increasingly been offered as short-term rentals to tourists. AirDNA data on Airbnb bookings is used to construct a measure of the number of apartments which are primarily used as rentals to tourists and therefore no longer function as residential apartments. This information is used to estimate the effects of Airbnb on residential house prices and for comparing the change in the number of short-term rental apartments to new apartments constructed during the year. The results show that about 2% annual increase in real house prices can be attributed to the growth in Airbnb apartments over the past three years which accounts for 15% of the rise in real prices of residential housing during the period. The growth in the number of Airbnb apartments based on the measure derived in the paper corresponds to about half to two thirds of new apartments constructed in 2016 in the capital region.

The working paper can be accessed here: Working Paper No. 76: Short-term renting of residential apartments - Effects of Airbnb in the Icelandic housing market, by Lúðvík Eliasson and Önundur Páll Ragnarsson.