Unknown snowy Iceland seems to be unsociable and cold but only at first glance. In fact, here is quite warm and the real estate market gets extremely hot because of those who desire to purchase real estate and settle here on the northern shores. Prices are rising, sales increase, builders and realtors cannot get enough.
“Iceland is a very “young" country, half of the people are under the age of 34 years. And the population is growing rapidly," said Ausgeyr Johnson, Economist about the causes of real estate demand and prices growth in Iceland to The Wall Street Journal. Indeed, since the beginning of this century, the population grew from 285 thousand to 325 thousand people. Many foreigners decide to move in Iceland for a permanent residence, despite the remote location from mainland Europe.
Realtor’s stories about successful sales are supported by statistical data. Eurostat considers Iceland to be one of the the leaders on the annual prices increase that jumped by 7.8% by Q4 2013. Major indexes are only in Estonia and Latvia.
Bertha Bernburg, Realtor at Stakfell & Stóreign, also gives optimistic forecasts for the next year or two. But no more than that: "The take-off is always replaced by the fall. And then another increase takes place. Property is a long term investment, but they are profitable in Iceland because it is a growing country."
Prices for apartments in the center of Reykjavik already reached €2,000 per sq.m. And according to Johnson this figure may increase by 20% at the end of 2014. Today two-bedroom apartment in Reykjavik, not in the center, costs about €100,000, while luxury apartments and penthouses can still be bought at the price up to €200,000.
The capital market is not limited only by apartments: there are also houses and townhouses. Prices are from €200,000 up to €400,000. House in Reykjavik of 180 sq.m. is for sale for €300,000, an area of 235 sq. m. is for €420,000. Those who like a traditional Icelandic architecture may pay attention to the colorful houses that have already become a symbol of Reykjavik. Gray, olive, green, egg- yellow and maroon – a pleasure to live in one of them may be purchased for €500,000-600,000.
How can foreigners acquire real estate in Iceland? It is amazing, but such a transaction needs permission from the authorities. Although sometimes it is necessary to wait a long time for it, it is issued without any problems. It is also necessary to have 0.8% over the house or apartment cost to pay a purchase tax. What to do with a property in Iceland? First, live there by yourself or come from time to time. This is the third country in the world for social progress level, in other words - for the comfort of living, only New Zealand and Switzerland are in front. Iceland is among top ten countries with the happiest people. There are also other ratings as conditions of life here are really good.
Second, you may lease out your property that is not cheap in Iceland. Thirdly, in case of emergency you can always sell the property. If you own the property for more than two years, the capital gain tax (the difference between for how much you bought and for how much it was sold) is not paid. If the sale takes place before, be ready to pay 20% of those profits (if it takes place).
Text: Kyril Ozerov, ee24.com