Currency controls fuel next housing bubble in Iceland

Iceland’s crisis-management policies are creating the island’s next property bubble less than four years after its banking meltdown threw the economy into recession.

Prices for new homes touched a record last quarter, having surged 40.1% since the final three months of 2010, according the national registry. Average house prices have risen 11.3% since the market bottomed at the end of 2009.

Currency controls imposed in 2008 and designed to protect the country from a mass capital exodus are channelling funds into a market that is showing symptoms of overheating.