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Iceland: Captivating Natural Environment or Real Estate Opportunity?

I recently visited Iceland and experienced not only its varied, rugged environment of lava fields, volcanoes, geysers, and fjords, but I also saw how this tiny country had recovered from their economic and banking crisis ten years ago.

Iceland has a population of about 350,000 of whom nearly two-thirds live in the capital Reykjavik on the West Coast.

The lack of crime, strong education, healthcare systems, and friendly population are drawing more people to Ice-
land every year. Since 2015, visitors to Iceland have doubled to over 2.5 million in 2018. The majority are from the
U.S. (30%) followed by the U.K. (16%), Germany (7%), and Canada (5%). These percentages also reflect the buying interest of international buyers. It’s interesting to note that a large number of Icelanders living abroad still have a second home in Iceland.


The Icelandic market is ever-changing with the opportunity to rent out property to locals or visitors growing, according to results of a recent Airbnb survey. Earnings from Airbnb accommodations and similar services were reported by The Iceland Review to be $55 million last year. The percentage of home-based accommodation for tourists is estimated at 50 percent, which has put a strain on this sector due to the rapid increase in tourism. This has had an impact on the expansion of the housing market and rising prices.


Real estate prices in the capital Reykjavik rose 14 percent in the first half of 2017 but have leveled off recently. The average rise in prices in the last ten years is 9 percent per annum. The average rent in Iceland is $2 per square foot and in Reykjavik $2.3 per square foot. The number of apartments under construction in the country is currently above the long-term average since before the banking collapse. However, The Iceland Review reported that an economist from Housing Financing Fund said that apartment construction had not kept pace with the demand, and the cumulative shortage of apartments is expected to exceed 9,000 by the end of 2018. Airbnb rentals are a significant factor in increased demand.


Average house prices, as well as their rate of inflation, vary widely between Iceland’s different regions. The four major driving forces of real estate are the current economy, interest rates, demographics and government subsidies from time to time. The current average price of residential property in Reykjavik is between $375,000 and $475,000. Real estate agents in Iceland charge commission of between 1.5 percent to 2.5 percent of the purchase price. Buyers under a purchase agreement filed with the Real Estate Register get a formal title in terms of a deed issued by the seller, and 25- to 30-year mortgages are available from commercial banks and the State Housing Fund.

An investment in Iceland is an investment in the country’s future and its strong revival to date can give investors some confidence when making their investment decisions.

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