As Iceland continues to captivate the imaginations of foreign visitors, many find themselves dreaming of a longer stay on the island. The enchanting effect of Icelandic society, with its low crime rates, excellent education and healthcare systems, stunning landscapes, and friendly locals, often leads people to consider establishing a permanent residence and deepening their relationship with the country.
Purchasing property in Iceland is a significant commitment for those who wish to make their connection with the island more permanent. Whether you're looking to buy a home to live in or invest in rental properties for tourists or locals, the Icelandic housing market is full of ever-changing opportunities.
Purchasing Property as a Foreigner in Iceland
When it comes to property buyers in Iceland, Americans take the crown with their purchasing interest, followed by visitors from the UK, Germany, Canada, France, and China. Interestingly, many Icelanders living abroad choose to purchase a second home in their mother country, which has become more common since the economic recovery following the 2008-2011 financial crisis.
Foreigners and prospective property owners must obtain approval from the Ministry of Justice in Iceland. The ministry handles various civic actions, including human rights, immigration, policing, and personal rights. EEA citizens legally domiciled in Iceland can purchase real estate like any natural-born citizen. To secure a residence permit, one must apply to the Icelandic Directorate of Immigration. Non-residents who don't intend to live in Iceland can still purchase property with special permission from the Ministry of Justice.
However, it is highly recommended for prospective buyers to spend some time in Iceland to familiarize themselves with the real estate market. This will provide ample opportunities to understand the dynamics of the trade.
Real Estate Prices in Iceland
The average house prices in different regions of Iceland vary greatly due to population trends and other factors. Four major driving factors influence the real estate market: the current economy, interest rates, demographics, and government subsidies. Prospective buyers should carefully consider these factors before making an investment.
The soaring prices in Iceland can be attributed to the increasing number of visitors to the country. In 2017 alone, the residential property price index nearly tripled, reaching 23.15%. Unsurprisingly, properties in Reykjavík, the capital, are more expensive compared to smaller towns. Currently, the average residential property in the capital ranges from 40 million ISK (US$ 382,500) to 50 million ISK (US$ 478,130).
The cheapest areas to purchase property in Reykjavík are Hafnarfjördur and Mosfellsbær, located on the outskirts of the city. This trend is due to the limited availability of properties closer to downtown. It has become evident that construction in the city cannot keep up with the high demand.
Egilsstaðir, located in East Iceland, is the most expensive town to buy property in the region. It has a larger population (approximately 2,350 people) and nearby amenities, including a hospital, college, and airport.
The Westfjords, a sparsely populated area, offers the cheapest properties in the country. In the past, the local municipality has even given out real estate lots for free in an attempt to boost the population.
Purchasing property in Iceland is an exciting endeavor, whether it's for a permanent residence or investment purposes. By understanding the Icelandic real estate market, navigating the regulations, and considering the economic factors, you can make an informed decision and begin your journey as a homeowner in this beautiful country.
Find out more by reading How to Move to Iceland | The Ultimate Guide Learn all you need to know about Finding a Job in Iceland Are you moving to Iceland and wondering How hard it is to speak the Icelandic language? Iceland is working to eliminate the Covid-19 virus. Please visit our page dedicated to Covid-19 information & support for all the latest updates on Iceland’s current travel restrictions.