Iceland is a traveler’s paradise, and for this reason, it is not unusual for a visitor to quickly transition from searching for Iceland car rental options to permanent real estate. Many people wonder if they could own some sort of an Icelandic property which could help them create a permanent connection with this land of gorgeous landscapes. This could be due to many reasons: you may be thinking about immigrating to Iceland, or you may want a house to stay every time you visit. It is also a great idea to be investing in Iceland real estate market as you can rent out your property to travelers or even the local Icelanders.
Iceland Real Estate: Purchasing Your Dream Home
Having your ‘home sweet home’ board outside a property in Iceland is a wonderful idea for many reasons. The scenic beauty makes this place absolute heaven, the crime rate is almost unheard of, local people are very friendly, the culture is extremely rich, and most importantly, the healthcare and educational systems are excellent. Whatever your reasons to invest in Iceland real estate are, this beautiful island welcomes its foreign buyers with open arms and beautiful land to build their happy place on.
Purchasing Iceland Property as a Foreigner
If we look at the statistics, the trend shows that many visitors get so much attached to this place that they end up looking for a residential property. Most of the visitors (around 27%) are from the United States, 16% are from the United Kingdom, 7% from Germany, 5% from Canada, 4.6% from France, and almost 4% are from China. Not only do the foreigners show interest in Iceland real estate, but a large number of Icelanders living overseas also invest in a second home in their country. This results in high demand for houses for sale in Iceland, especially after the economic recovery following the 2008–2011 financial meltdown.
In order to buy property, you need approval from the Ministry of Justice which deals in a number of issues including immigration, civil defense, human rights, policing, enforcement of sentences, etc. The Housing Financing Fund (HFF) is Iceland’s government-owned mortgage lender that allows the European Economic Area (EEA) nationals who are residing in Iceland to buy property like any Iceland-born citizen.
You must apply to the Icelandic Directorate of Immigration for a resident permit. If you fulfill all the conditions of the application, the Iceland resident permit is granted which allows you to enter the country and stay there for more than three months. If you don't intend to reside here and only plan to invest in an Icelandic property, you can still get permission from the Ministry of Justice. However, any prospective buyer should ideally spend some time in Iceland to get accustomed to the Iceland real estate.
Price of Property in Iceland
The average price of the Iceland homes for sale depends upon the region as well as the rate of inflation. The location of the land, the population of the area, and access to amenities define the price point of any house. These rates may fluctuate over time. So, if you are thinking about investing, you need to keep in mind some of the main factors that drive the real estate industry – the country’s current economy, government subsidies, demographics, and the interest rate.
The house prices may also increase due to the high influx of visitors. In 2016, Iceland’s residential property price index (also known as the House Price Index – HPI) was 8.06% and it almost tripled in 2017 to a massive 23.15%. In the same period, the price of a single flat house increased by 25.5% and that of a multi-flat house was almost to 24.5%. If we analyze the Iceland real estate market for the country’s capital city, the Reykjavik houses for sale hold a higher price than the ones in smaller towns, for obvious reasons. An average house in Reykjavik real estate is between 40 million ISK to 50 million ISK (around US$ 382,500 to US$ 478,130).
If you are looking for Reykjavik homes for sale, you will most likely find the cheapest price in the towns of Hafnarfjordur and Mosfellsbaer. They are situated on the outskirts of the capital. The peninsula of Westfjords off the Ring Road is the most thinly populated area of the country which has the cheapest Iceland real estate. As a matter of fact, the local municipality used to distribute the land free of cost to increase Westfjords' population.
Egilsstadir is the largest city in terms of population (at least from Iceland standards) with approximately 2,350 people and is situated in East Iceland. It has the most expensive Iceland homes due to its proximity to amenities such as the airport, hospital as well as a college.
Building Your Property in Iceland Real Estate
Most Icelanders will tell you that their family homes were constructed by their ancestors. If you are not too keen on looking at the houses for sale in Iceland and are more inclined towards building (or altering) one, you must get a building permit from the municipality. However, you cannot build your property near the national parks of Iceland including the Vatnajokull, Thingvellir, and Snaefellsnes areas.
Iceland Property and Real Estate Agents
Having English-speaking local agents in Iceland is very helpful when you are buying property. They provide you with the information and opportunities that you may not be aware of. But nothing in life is free, and nor are these real estate agents as they come with their transaction costs. A real estate agent fee can be somewhere between 1.5% and 2.4% of your property’s overall cost. Not only that, the fee stamp duty requires for transferring property is somewhere around 2,000 ISK in addition to the 0.8 percent of the value of the official property. Also, you will have to pay 0.1 percent of the home’s value as the cost of registering it under your name.
It is quite natural to visit this island, get mesmerized by its beauty and then want to have your own home in Iceland. Now that you know everything about the Iceland real estate market, when are you making the big move?