How does one purchase real estate in Iceland? Is it possible for foreigners to buy a house in Iceland? What are the average house prices across the country, and are there any regulations that can jeopardise the house-buying process? Read on to find out everything there is to know about purchasing a property in Iceland.
As Iceland continues to enchant the imaginations of foreign visitors, many begin to fantasise about staying in the country far longer than the mere duration of their holiday.
Some will even go a step further, seriously contemplating whether they could live on the island permanently. This should come as little surprise given the endearing effect that Icelandic society often leaves people with.
Consider the lack of crime, the strong educational and healthcare systems, the incredible natural landscapes, the friendly local population; all of this and more draws people toward a longstanding relationship to the country, a relationship that many would like to take to the next level.
Pxhere. Creative Commons.
I talk of purchasing property in Iceland, arguably the greatest commitment that one can make towards this small island. Whether one is looking to purchase property here in which to permanently reside, or hoping to rent out property to foreign guests or local Icelanders, the Icelandic housing market is one of ever-changing opportunity.
When we look at the genesis of the visitors travelling to Iceland, the majority hail from the United States of America (27%), with guests from the UK (16%), Germany (7%), Canada (5%), France (4.6%) and China (4%) following quickly on.
This tends to reflect property buyers in Iceland, with Americans taking the crown for their purchasing interest. Of particular note, however, is the sheer number of Icelanders living abroad who choose to purchase a second home in their mother country. This has undoubtedly increased since Iceland's economic recovery following the 2008-2011 financial crisis.
One of the overarching rules which apply to foreign and prospective property owners is the need to gain approval from the Minister of Justice in Iceland. The Ministry of Justice in Iceland deals with a wide range of civic action, including human rights, immigration, policing and personal rights, elections, etc.
Housing Financing Fund claims that EEA citizens who are legally domiciled in Iceland can purchase real estate like any natural born citizen. To secure a residence permit, one must apply to Icelandic Directorate of Immigration.
For those with no intention of residing in Iceland, it is still possible to purchase property if special permission is sought from the Ministry of Justice. It is highly recommended, however, that a prospective buyer spends some time in Iceland in order to become acquainted with the Icelandic real estate market, allowing them plenty of opportunity to understand the ebbs and flows of the trade.
Wikimedia. Creative Commons. Credit: Thomas Quine.
Average house prices, as well as their rate of inflation, vary wildly between Iceland’s different regions. For one, this is following the population trends in each respective area. And yet, given the market's flexibility, any prospective buyer should understand that these rates continue to sculpt themselves in different directions, largely due to four primary motives.
The four major driving factors of the real estate market are the state of the current economy, interest rates, demographics and government subsidies, all of which should be taken into account before going forward on a proposed investment.
As has been explored in our previous articles, How To Move To Iceland | The Ultimate Guide and How To Find a Job in Iceland, relocating to another part of the world takes much consideration, and should be expected as a series of seemingly insurmountable obstacles.
One of these is the current trend of soaring prices, a pattern fuelled by Iceland's ever-increasing influx of visitors. In 2017 alone, the residential property price index for the entire country nearly tripled from 8.06% in the previous year to a whopping 23.15%.
As is to be expected, properties in the capital, Reykjavík, are more expensive than those situated in Iceland’s smaller towns. In the same period, the prices of a single-flat home in Iceland increased by 25.5%, whilst multi-flat came in at just under, 24.5%. Currently, the average residential property in the capital is between 40 million ISK (US$ 382,500) to 50 million ISK (US$ 478,130).
The cheapest parts of the city to purchase property are Hafnarfjördur and Mosfellsbær, both of which sit on the city’s outskirts. This follows the expected trend, in large part due to the limited supply closer to downtown. Over recent years, it has become more and more clear that construction in the city is unable to keep up with the pace of the demand.
The most expensive town in which to purchase property in East Iceland is Egilsstaðir due to it being the largest populace in the region (approx. 2,350 people), as well as the nearby amenities, including a hospital, college and airport.
The cheapest area in the country to purchase property is the sparsely populated Westfjords. In fact, in the past, it has been known for the local municipality to give out real estate lots for free in the hope of bolstering the Westfjords population.
If the intention is simply to reside in Iceland, then the reasons are clear, obvious and compelling; this county is renown for its incredible scenery, forward-thinking, English-speaking population and its richly creatively culture, securing it as one of the safest and most aesthetically pleasing locations on earth.
Granted, for what Iceland makes up in captivating natural environments, it lacks in urban development, reflecting the country’s minute population of approximately 350,000 people. Thus, one of the biggest reasons to purchase property here is an investment in Iceland's future.
The days of old that saw Iceland isolated from both international visitors and any influence on the world stage have long gone; the country simply commands too much interest from the outside. With that interest, naturally, comes cold hard cash. This means, despite the current issues associated with the pace of construction in Iceland, that this nation's urban development is still very much in its early stages.
Speaking to local Icelanders, it is not uncommon to hear that their family homes were, back in the day, constructed by an ancestor. Such construction has done much to contribute to this island's unique architecture, with many examples also demonstrating the Icelandic knack for balancing their homes beautifully with the surrounding environment.
This DIY approach to house-building has, naturally, become far more regulated over time, but opportunities are still widely available for those looking to begin their journey with nothing but an empty lot, some blueprints and a head full of ideas.
To build property, rebuild or alter a property with extensions, one must obtain a building permit from the inspector of the municipality in question. The building inspector will converse with varying committees in order to ensure all construction regulations are met before providing a permit.
For those looking to purchase property in Iceland, a local and English-speaking real estate agent will likely be necessary, if only for the insider knowledge and purchasing opportunities they can bring to the table. However, this does entail extra cost.
For one, the real estate agent's fee can be between 1.5% and 2.4% of the overall cost of the property. On top of that, the stamp duty rate for property transfer comes out at ISK 2000, added on to 0.8% of the official property value. Finally, the cost of registering the property will be 0.1% of the property value.
Below are a few examples of English-speaking real estate agents in the capital.
Fjaroargotu 17, Reykjavík, IS-220, Iceland, IS
Tel: +354 05 20 2600
Laugavegi 97, Reykjavík, IS-101, Iceland, IS
Tel: +354 04 40 6000
Laugavegur 66, Reykjavík, IS-101, Iceland, IS
Tel: +354 03 11 3101
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