| Summary: | In this paper, the author examines the development of the spatial distribution of housing prices. Due to consumer preferences for access over amenity value, there is a spatial disparity of housing prices. According to Alonso¡¯s extension of von T¨¹nen¡¯s theory, the relationship between housing prices in urban and rural areas tends to follow certain principles. This relationship is more often negative than positive, i.e. the price of a standardized unit of housing declines with increasing distance from a central business district (CBD). It has been documented that this relationship is negative for Iceland, as well as in many regions of other countries. It is argued here that this relationship has become increasingly marked in Iceland, most likely due to the altered household preferences and structural changes. A macro panel data set from Iceland will be used, representing several essential variables of the residential housing market for 79 municipalities in Iceland from 1981 to 2006. Housing prices, Bid-rent curve, Distance gradient, Agglomeration economies, Amenity values
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