I’m a foreign national. Can I buy property in Iceland?

iceland real estate

The short answer is yes, but there are many conditions and caveats to consider. It’s also worth noting that due to a growing population, the volcanic eruptions on the Reykjanes peninsula (which have displaced Grindavík residents), and rising post-COVID interest rates, Iceland is currently experiencing a housing crisis. So, for potential buyers, it may not be the most economical (or ethical) time to buy property in Iceland.

Who can buy property in Iceland?

Briefly, foreign residents with a legal domicile in Iceland are eligible to buy property in Iceland.

The relevant section from the Act on the Right of Ownership and Use of Real Property states:

No one may acquire the right to own or use real property in Iceland, including fishing and hunting rights, water rights or other real property rights, whether by free assignation or enforcement measures, marriage, inheritance or deed of transfer, unless the following conditions are met:

1. In the case of an individual, he shall be an Icelandic citizen or have domicile in Iceland.

2. If several individuals are involved in a company, and each bears unlimited liability for the debts of the company, they shall all be Icelandic citizens or shall have been domiciled in Iceland for at least five continuous years.

3. In the case of a company in which some members bear unlimited liability, and others only limited liability, for the company}s debts, all those who bear unlimited liability shall be Icelandic citizens or shall have been domiciled in Iceland for at least five continuous years.

4. In the case of a company in which none of the members bears unlimited liability for the company}s debts, or an institution, the company or institution shall have its domicile and venue in Iceland and all its directors shall be Icelandic citizens or shall have been domiciled in Iceland for at least five continuous years. In the case of joint-stock companies, 4/5 of the share capital shall be owned by Icelandic citizens, and Icelandic citizens shall exercise the majority of the votes at shareholders} meetings.

Importantly, the stipulation that foreigners have a legal domicile raises some important considerations. In order to be legally domiciled in Iceland, one is required to have a kennitala (a civil registration number) and be registered at Registers Iceland.

This likewise raises several other conditions. Non-EEA residents will need a residency visa, and if they are not independently wealthy, a work permit as well. Additionally, being legally domiciled entails already having a residence, i.e., renting a property, since you will not initially be able to buy property outright. Retirees may want to read more about retiring in Iceland.

There is, however, a way to circumvent some of these requirements: special permission from the Minister of Justice, in which case the Minister may grant permission to deviate from the conditions laid out in the Act on the Right of Ownership. Such special permits only pertain to one specific property, which cannot exceed 3.5 hectares, and the applicant may not own other properties in Iceland. As you might expect, there are some conditions and further exceptions to these exceptions.

The relevant application forms can be found on the official government website, or here below.

Form 1.

Form 2.

Applications can either be printed, scanned, and emailed to [email protected], or mailed directly to the Ministry. Some real estate agents that specialize in international clients may offer to take care of this application, for a fee.

Another aspect of buying property in Iceland to keep in mind is that Icelandic law makes a distinction between vacation houses and legal residencies. One cannot be legally domiciled, that is, registered, to a summer house. One’s legal residence is required to be a residence intended for year-round habitation.

Real estate listings in Iceland

Most major newspapers have real estate listings, which may be helpful if you’re property hunting in Iceland.

Vísir real estate listings.

Morgunblaðið real estate listings.

Prices will of course vary based on a variety of factors, but average prices per square metre can be found here. Note that the prices given are in hundreds of thousands of ISK. At the time of writing, the average price in the capital region is about 1 million ISK per square metre [$7,126, €6,650], so a relatively modest apartment in Reykjavík might cost some 70 million ISK [$501,000, €465,500].

How to buy real estate in Iceland

So you’re legally eligible to buy property and you’ve found the right place – how, exactly, does one go about buying it?

It’s a complicated process, and if you’re serious about moving forward with your decision, we do recommend getting in contact with a real estate broker and possibly a lawyer specializing in such matters.

Nevertheless, here are the broad contours of buying property in Iceland. Íslandsbanki also has a useful roadmap for first-time homebuyers. 

Step 1: Determining whether you are legally able to buy property, as described above.

Step 2: Getting your finances in order. Of course, this is its own topic entirely, but it may be difficult to get a mortgage at an Icelandic bank without long-term residency and/or citizenship. Many foreign nationals looking for real estate in Iceland may need to take out loans in their home countries to be able to pay cash in Iceland.

Step 3: Finding a property. The real estate listings given above are a good place to start. At this stage, you may also begin looking for a real estate agent. There are real estate agents that specialize in dealing with English-speaking clients and wrangling with some of the legal issues that arise in such cases.

Step 4: Once you’ve found an agent, they should be able to guide you through the rest of the process (n.b. Agent fees generally range from 1.5% to nearly 3% of the total sale cost). One thing to keep in mind is that you will also need a notary to sign official documents. Fees for transferring the property and registering the newly-purchased property can amount to around 1% of the total property value.

 

New Housing Report Shows Increase in New Apartments

architecture Kirkjusandur apartments

The latest report on housing shows that the number of new apartments has increased significantly this year, and there is still momentum in the construction industry this year.

According to data from the Housing Registry of the Housing and Construction Authority, the number of apartments under construction has remained relatively stable since the beginning of the year and is well above the historical peak, with over 7,000 units. The number of completed apartments has increased significantly in both the capital region and rural Iceland compared to the same time last year, according to the agency’s data.

Read More: 4,000 Apartments Needed to Meet Housing Demand

The number of apartments at the first stage of construction increased by 36% since last year, according to the latest Housing and Construction Authority census from March. Additionally, statistics from Statistics Iceland show that activity in the construction industry has continued to grow rapidly this year at a constant level. There are as of yet no clear signs that the number of apartments under construction has decreased, though these numbers could be affected by rising interest rates.

Despite the increase in the population, it appears that the number of residents per apartment has decreased from the years 2018-2020, hopefully indicating that construction has kept pace with population growth. The housing report states that there doesn’t seem to be a significant shortage of apartments compared to the previous decade. The report also indicates that authorities will continue to support the supply of apartments, including ongoing funding for the public housing system, as announced in June.

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Swedish Real Estate Company, Heimstaden, to Sell 1,700 Properties

iceland real estate

Swedish Real Estate Company, Heimstaden, is set to sell 1,700 properties as it prepares to exit the Icelandic market. RÚV reports. 

Heimstaden started operating in Iceland some three years ago and currently owns and manages around 1,700 rental apartments in the country. In total, the company owns and manages some 160,000 properties across 10 European nations.

However, in all other nations except for Iceland, pension funds and institutional investors have played large roles investing in Heimstaden.

Read more: Real Estate Market Slows

Gauti Reynisson, Heimstaden’s CEO in Iceland, stated to RÚV that they had been trying to get Icelandic pension funds and investors on board since the beginning.

However, despite some four months of negotiating, no progress has been made.

According to Gauti, even though demand for housing is high, the market conditions for long-term investment are too difficult in Iceland.

Such a large selloff of properties is likely to have a significant impact on the real estate market both in Reykjavík and the rest of the nation. Gauti stated to RÚV that Heimstaden is trying to manage the situation to minimize the impact on renters.

The company plans to start selling the apartments this summer, but Gauti says that they will respect all rental agreements, and people will have the opportunity to rent their apartments until the end of their notice period. Most of Heimstaden’s tenants in Iceland have a 12-month notice period in their contracts.

Access to Mt. Skessuhorn Not to Be Restricted, Despite Sale

Borgarfjörður, mountain

A spokesperson for the Canadian couple who purchased the property Horn in Skorradalur, West Iceland, has told Fréttablaðið that access to Mt. Skessuhorn – which lies within the property – will not be restricted. Anyone who wants to hike on the mountain may continue to do so.

Concerns over possible restrictions

Earlier this week, Fréttablaðið reported that a Canadian businessman (who is said to have made his fortune in tech) had acquired the property Horn in Skorradalur, West Iceland. The estate includes the renowned Mt. Skessuhorn and is home to three fishing rivers: Hornsá, Álfsteinsá, and Andakílsá.

Read More: To the Vote (Municipal Elections in Skorradalur) from IR magazine

Last May, the property was listed for sale. It sold within four days at a price exceeding the initial asking price of ISK 145 million ($1 million / €9720,000). As per Fréttablaðið, construction permits were granted in February for two edifices on the property: a capacious 1,000-square metre private residence, and a 700-square metre guesthouse, inclusive of a gymnasium.

After news of the sale went public, the chair of Samút – an association of outdoor recreation clubs in Iceland – stated that, although the news did not come as a surprise, he harboured concerns that foreign parties who purchased land in Iceland, and who are often seeking seclusion, would restrict access to their properties.

Access not restricted, spokesperson claims

Halldór Kristjánsson – CEO of the destination management company Nordic Luxury, and agent of the Canadian couple who bought Horn – told Fréttablaðið that the buyers did not intend on restricting access to Skessuhorn; the couple simply planned to erect a private residence on the property.

“Anyone who wants to walk on this mountain can continue doing so,” Halldór stated, adding that public rights would be duly honoured. The only thing that the couple would comment on, Halldór observed, was if people arrived in large groups and parked their vehicles outside the couple’s residence. He emphasised that the couple had no intentions of imposing any travel restrictions whatsoever and remarked that the public discussion had been blown out of proportion.

In conclusion, Halldór affirmed that the couple had no intention of utilizing the land for tourism-related activities. “They plan to build a residence for their own private use for a significant portion of the year,” he stated. He further noted that while the possibility of renting out some of the buildings existed, no decisions had been made yet. “At present, there are no proposals for any other form of development apart from private housing on the premises.”

This article was updated at 01:54 PM.

In Focus: Indexed Mortgages

indexed mortgage iceland

Iceland’s housing market has undergone rapid changes over the past two years, with prices shooting upward. The market has begun to gradually cool, as a result of rising interest rates, with prices stalling or even slightly lowering in some cases. While there are multiple factors that affect housing prices – including availability and a pandemic-inspired […]

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Almost 4,000 New Residences Under Construction

A new report published by the National register of Iceland indicates that as of April, 3,839 residences are currently under construction in Iceland, and building permits have been issued for 1,953 more. These were among the figures were published in a recent report by the National Register of Iceland.

The vast majority, or 2,301, of the residences that are under or pending construction will be located in Reykjavík. The town of Njarðvík on the Reykjanes peninsula in Southeast Iceland will have the second most new residences, or 574. The capital-area towns of Kópavogur (492), Garðabær (388), and Mosfellsbær (343) round out the top five. Interesting, perhaps, is the number of places that have five or fewer new residences under construction. Forty-five municipalities, including the islands of Flatey and Hrísey, are building a single new residence; 21, including the island of Grímsey, will have two new residences; seven will have three new residences; eight will have four.

As of April, there were 1,660 private residences under or pending construction throughout the country and 4,132 multi-family buildings. The total number of residences occupied in the country is currently 138,998. This marks a 859-residence increase from December 2018, when there were 138,139 residences occupied throughout the country.

The National Register has been keeping records on the number of residences in the country, but as is visible in the new report, has begun keeping more granular data. Now, it’s possible to see how many total building permits have been issued (indicated in gray on the report) versus how many are actually under construction (green). The Register is also tracking what kind of properties are being built, i.e. multi-family buildings or private homes, as well as the square footage of individual units. The report cannot be considered fully comprehensive, however, because it only reports on properties that have been listed in the property register by each municipality’s building officer.

New Legal Residence Laws Take Effect

Árneshreppur á Ströndum.

Property owners in Iceland are now required to ensure their tenants have correctly registered their legal residence, RÚV reports. The National Registry also has increased authority to investigate cases where a person’s legal residence is believed to be falsely registered. These are just a couple of the changes to legal residence laws that took effect on January 1. Legal residence legislation became a hot topic of discussion during municipal elections in 2018, when it was discovered several individuals had falsely registered their addresses in one municipality in order to influence voting outcomes.

Property owners could be fined

Property owners are now required to ensure their tenants have correctly registered their legal residence. The laws assume property owners will receive notification when an individual registers their legal address at their property, a new practice for Registers Iceland. If landlords do not ensure the legitimacy of the registrations on their property, they could face fines.

Legal residence while abroad

 More individuals who live outside of Iceland can maintain a legal residence in the country, including students studying abroad and those living abroad due to illness. Both groups must have had a legal residence in Iceland for a minimum of two years in order to qualify.

Authority to investigate 

The changes to legislation also grant the National Registry increased authority to investigate cases where false registration of a legal residence is suspected. In such cases, the institute can request information from local authorities or private businesses which store data regarding an individual’s residence. Authorities and businesses are granted permission to share this data with the National Registry under the revised laws.

Spouses can have separate legal residences

Married couples are no longer legally required to be registered at the same residence under the amended legislation. Married individuals are now able to temporarily register at a different residence, such as a summer home or staff residence.

In Focus: Whose Land Is It Anyway?

In 2011, a Chinese businessman named Huang Nubo tried to buy one of the largest farmlands in Iceland, Grímsstaðir á Fjöllum. Since Nubo was neither an Icelandic citizen nor a resident of the European Economic Area (EEA), he was required to apply for an exemption from Iceland’s Ministry of the Interior in order to purchase […]

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Remote Eastern Fjord for Sale

A plot of land in the remote fjord of Hellisfjörður in East Iceland is for sale, Austur Frétt reports. The plot, which is not accessible by road, is 1,900 hectares [4,695 acres] and therefore covers almost the entire fjord.

The fjord is currently in the ownership of Hollywood film producer Sigurjón Sighvatsson, who has owned it since 2018. According to Ævar Dungal, the real estate agent overseeing this sale, there’s already been a fair amount of interest from potential buyers in both Iceland and abroad. He notes, unsurprisingly, that it’s rare for whole fjords to be put up for sale in Iceland, but that in addition to that fact, this particular fjord has a lot of natural resources and interesting history to further recommend it.

A Norwegian whaling station was operated on the north side of the fjord from 1901 – 1913, and remnants of the operation are still visible there. There also used to be a village of the same name at the base of the fjord, although the whole area has been uninhabited since 1952. A summer house was built in the fjord in 1970, however, and is being sold along with the land. The house, which has solar panels installed on the roof, has two bedrooms, a bathroom, a kitchen (with gas stove), and a living room. The fjord also boasts rich bird life, reindeer, and great trout fishing.

As there is no road into the fjord, the property must be reached by boat, horse, or on foot. This is unlikely to discourage potential buyers, however. “Many of the people who have shown an interest think it’s actually an advantage that there’s no road,” explained Ævar.

See photos of the property here.

Government Reconsiders Land Ownership Laws

Nearly one third of all land in Iceland is owned by businesses, not individuals, RÚV reports. Land purchase laws have become a subject of public debate recently, particularly with respect to non-residents buying land in the country.

A government task force is in the process of re-examining Iceland’s land purchase laws. Minister of Transport and Local Government Sigurður Ingi Jóhannson says the group hopes to introduce new legislation on the matter early this autumn. He believes tighter regulations on land ownership could apply to both Icelanders and foreign nationals.

“Many of us are of the opinion that areas outside urban areas, land and larger territories, should be in the ownership of Icelanders or those who live on the land here in the country and work on it,” Sigurður Ingi stated. “So the people there live in the community, create jobs and are not hoarding land which could later lead to there being deserted land or even deserted valleys.”

According to law, residents outside the European Economic Area (EEA) cannot purchase land in Iceland without a legal exemption granted by the Minister of Justice. However, if the land is purchased by businesses, it can be near impossible to determine who the true owners are.

Sigurður Ingi says it is difficult to prevent businesses from buying land in Iceland by way of other businesses. “Therefore I think that requirements for usage rights, exploitation rights, and requirements for some kind of usage of the land are better suited to deal with this factor than legislation alone. We’ve simply seen it, it’s difficult to have oversight in this.”

In 2013, parliament passed legislation barring foreign nationals from owning property in Iceland without a legal domicile or business operations in the country. The legislation was later rescinded, as it was believed to be a violation of EEA regulations. Minister of Justice Sigríður Andersen says the ministry is working to determine which conditions should apply to foreigners who wish to purchase land in Iceland. Sigríður has expressed her belief it would not be right to ban foreign nationals from purchasing land altogether.