* Housing prices leap as tourist numbers surge
* "Like Disneyland" in downtown Reykjavik - Pirate leader
* Tourism lifts economy from 2008 banking collapse
* Tourism, house shortages to figure in Oct. 29 vote
By Stine Jacobsen
REYKJAVIK, Oct 10 Hunting in vain for a home to
rent in Reykjavik, Vally Einarsdottir says landlords either
demand too much money or expect her to move out in the summer to
make way for tourists who are stoking Iceland's economic
For many Icelanders like Einarsdottir, a single mother,
rising house prices are among the downsides of the volcanic
island's tourism boom that has helped the economy back from the
brink after a 2008 banking collapse.
Housing shortages and high prices, partly stoked by tourists
wanting to see everything from the Northern Lights to landscapes
used in the HBO TV series "Game of Thrones", are among the
campaign issues ahead of a parliamentary election on Oct. 29.
"The consequence is anxiety. Anxiety over everything. Just
looking at the fact that we may be homeless," said Einarsdottir,
a 33-year-old who works in customer support at an IT firm. She
has been looking for an apartment for herself and her
10-year-old daughter since May.
Speaking in Reykjavik, where cranes dot the skyline, she
said she has to vacate her current rental by November as it is
being sold. Construction is picking up after the financial
crisis, fuelled by demand for homes and hotels.
Einarsdottir said rentals start at around 200,000 Icelandic
crowns ($1,760) a month, against the 140,000 she is now paying.
Many landlords prefer to rent to tourists in the summer
rather than to Icelanders. That reduces accommodation on the
market, inflates prices and imposes conditions such as a
requirement to vacate the property from May to September.
Opposition parties say the centre-right government has
thrown open the doors to foreign tourists with too little
regulation of a huge influx that they say threatens the
character of the island.
"It's like the city (Reykjavik) is not my city anymore, it's
like Disneyland downtown," said Birgitta Jonsdottir, leader of
the anti-establishment Pirate Party, which could form the next
government after the parliamentary vote.
Opinion polls show support for the party running at over 20
percent, slightly ahead of the Independence Party, which shares
power with the Progressive Party, and is polling at around 12
percent, well below the 24 percent it got in the 2013 election.
Jonsdottir said her party also wants restrictions on the
numbers of tourists visiting natural sites outside the city,
which often lack of basic facilities such as toilets.
"I as an Icelander used to go there all the time, but I
can't go there anymore, it's just too crowded," she said. The
party would work to introduce a tax on hotels to make it
possible to invest in sanitation and other infrastructure.
Fuelled by the tourism boom, economic growth this year is
expected to hit 4.3 percent and the latest data shows a
seasonally adjusted unemployment rate of 3.1 percent. Tourism
now accounts for more than 10 percent of jobs, according to
Icelandic bank Arion estimates that 8-10,000 extra houses
will be needed before 2020, in a country of 330,000 inhabitants
as demand picks up after the financial crisis. It reckons
tourism could make up almost 10 percent of GDP in 2016.
Residential housing prices were up 12.4 percent in August
compared with a year ago, according to Arion, while Reykjavik
rental prices rose 9 percent in August year-on-year and were up
55 percent from early 2011, data from Registers Iceland showed.
"A lot of the homes that would normally have gone into the
market have been bought or used to rent out to tourists,"
Housing Minister Eyglo Hardardottir told Reuters.
"Tourism is a major change, because of the changes in the
way people travel. They travel much more independently," she
said. "What I've been emphasising is ... that we get the number
of homes up."
Contrasting with the Pirates, Hardardottir's centre-right
Progressive Party's campaign points to its success in rescuing
the economy and highlights the need for continued stability.
"During this term we've been emphasising lower debt and
higher salaries ... The big question for the next term will be
with regards to the welfare system like healthcare and
The pressure on the housing market is expected to increase
as the number of tourists is projected to grow by 35 percent
next year against this year to 2.37 million, outnumbering
inhabitants by seven to one, Islandsbanki research showed.
The number of properties listed on Airbnb, an online rental
portal, jumped 126 percent to around 2,700 by end-November 2015
compared with December 2014, according to Islandbanki.
Last year parliament approved legislation that limits how
many days per year people can rent out without a licence. It
also imposed an income limit of 1 million Icelandic crowns.
Tourism's rise makes the country sensitive to a sudden
slowdown even though the risks are far smaller than with the
massive over-dependence on the banking sector that triggered a
near-collapse of the economy.
"Should banks become overly concentrated in the industry, a
sudden slowdown in tourist inflows could have repercussions on
the still-recovering banking sector," Moody's said in a research
note, saying loans to the tourist industry constitute around 10
percent of the loan portfolios of Iceland's commercial banks.
A slowdown in the tourists' home countries could also hit
demand. The number of British tourists has slowed amid the
pound's depreciation after the Brexit vote, said Islandsbanki.
However, the tourism boom is good for the economy overall.
In August, Iceland took a big step in dismantling its 8-year
old capital controls and the smooth progress so far has earned
the country a double-notch credit rating upgrade and has been
driving up its currency.
($1 = 113.5500 Icelandic Crowns)
(Additional reporting by Ragnhildur Sigurdadottir, editing by
Alister Doyle and Alison Williams)