Published on and written by Cyril Jarnias
The Icelandic real estate market intrigues both local buyers and foreign investors. In a territory with fewer than 400,000 inhabitants, the price gap between the capital and provincial towns is nevertheless considerable, and supply pressures are not felt with the same intensity everywhere. Comparing prices between cities helps to understand where centrality comes at a premium, where opportunities still exist, and how the residential geography of a country experiencing a demographic and tourism boom is being redrawn.
A Tight National Market, but Slowing Down
At the national level, residential prices continue to climb but at a slower pace than at the post-Covid recovery peak. The national housing price index is still rising by about 7.9% year-on-year (3.6% in real terms, adjusted for inflation), after having peaked at nearly 11.9%. Over the recent 2018-2023 period, average annual increases have ranged between 6% and 8%, continuing a long upward cycle that began after the financial crisis.
The population has reached about 390,000, a level only anticipated for 2025, thanks to growth of around 15,000 people since early 2022.
Despite the monetary tightening initiated after Covid – with mortgage rates frequently above 9% for non-indexed loans – experts still anticipate a “good year” for residential real estate, even if the pace is normalizing. Forecasts indicate price inflation on the order of 6% per year in the coming years, in a context where supply remains constrained by strict zoning rules and the desire to preserve natural landscapes.
The Capital Region, the Expensive Heart of the Icelandic Market
In ICELAND, the real estate center of gravity is unsurprisingly in the capital region, around Reykjavik. About two-thirds of the population live there, and nearly 60% of all residential transactions are recorded there. This is where prices are highest, whether for buying or renting, and where the gap with the rest of the country is most pronounced.
Purchase Price Levels in the Capital Region
In early 2025, the average purchase price for all housing in the capital region is around 87 million ISK, or about $620,000, with an annual increase of over 11%. Within this area, single-family houses trade for considerably more than apartments.
| Region / Type | Average Price (ISK) | Average Price (USD) | Annual Change |
|---|---|---|---|
| Capital Region – All Properties | 87,043,296 | 619,746 | +11.06% |
| Single-Family Houses – Capital | 145,296,331 | 1,034,506 | +11.67% |
| Apartments – Capital | 75,977,558 | 540,958 | +7.69% |
Converted per square meter, the cost of an apartment in Reykjavik is among the highest in the country. Recent data place the average price around 529,000 to 618,000 ISK/m² for residential property, with peaks between 800,000 and 1,500,000 ISK/m² in some central sectors. New constructions in the center easily exceed one million ISK per square meter, while older buildings hover around 900,000 ISK/m².
To give an order of magnitude, a modest apartment in the capital can be worth about 70 million ISK. Family homes in the least expensive segments are typically between 40 and 50 million ISK, but their prices can be much higher in sought-after neighborhoods.
Reykjavík versus Kópavogur and Hafnarfjörður
Even within the capital region, price differences between municipalities and neighborhoods are significant. Reykjavik, Kópavogur, and Hafnarfjörður form an urban continuum, but they are not positioned at the same level.
Monthly rent per square meter figures illustrate these gaps:
| City (Capital Region) | Average Rent (ISK/m²) | Average Rent (USD/m²) | Annual Increase |
|---|---|---|---|
| Reykjavík | 4,041 | 28.76 | +9.8% |
| Kópavogur | 3,810 | 27.12 | +8.9% |
| Hafnarfjörður | 3,646 | 25.95 | +8.4% |
Reykjavik remains the most expensive city per square meter, even though neighborhoods like West Reykjavik (postal code 107) show lower levels than areas experiencing strong expansion like eastern Kópavogur (postal code 203), where larger apartments – around 108 m² – strongly pull up the average.
The average price per square meter in downtown Kópavogur, one of the highest values in Iceland.
Hafnarfjörður, often presented as one of the “affordable” corners of the capital region, is nonetheless well above national standards. Historical data show, for example, that a three-bedroom apartment there rented for around 240,000 ISK per month in 2020, compared to about 319,000 ISK for an equivalent in Reykjavik.
A Capital Region Rental Market Under Extreme Pressure
The rental market in the capital area concentrates all of the country’s pressures. The rental index established by the Housing Authority (HMS) for this region is rising 11.4% year-on-year, while general inflation is around 4%. In Reykjavik, rents have increased by nearly 10% in one year, according to the latest available data.
The price ranges observed in the capital give an idea of the current expensiveness of the real estate market.
| Type of Housing | Average Monthly Range (Reykjavik) |
|---|---|
| Studio / 1 Room | 160,000 to 260,000 ISK |
| 2 Rooms | 200,000 to 280,000 ISK |
| 3 Rooms and more | from 260,000 ISK, up to 370,000+ ISK |
Examples of listings in the city center or central neighborhoods confirm these levels: 78 m² in Miðborg rented for 390,000 to 395,000 ISK, 113 m² for 550,000 ISK, or a 70 m² apartment in Háaleiti priced at 460,000 ISK. On some portals, a 38 m² studio negotiates for nearly 280,000 ISK, and a 100 m² apartment can reach 470,000 ISK per month.
In units more comparable to the rest of Europe, the average rent for a 2-room apartment (T2) in Reykjavik is estimated around 260,000 ISK. A room in a shared apartment in the center can cost between 60,000 and 90,000 ISK, or €500 to €700. In dollars, it’s around $1,800/month for a 1-room (T1) in the center, $1,400 for a T1 on the outskirts, and $3,000 for a 3-room apartment in the center.
This rental surge partly explains why 14% of Icelanders aged 25-34 still live with their parents, a proportion twice as high as in other Nordic countries. The lack of student housing, the conversion of apartments into tourist rentals, and the constant arrival of immigrant workers heavily weigh on the ability of young households to find independent housing in the capital.
Akureyri and Major Provincial Towns: Cheaper but No Longer Very Cheap
Faced with the cost of living in the capital region, more and more people are looking towards Akureyri and other major regional towns. These towns remain less expensive than Reykjavik, but the difference is not always as dramatic as one might imagine.
Reykjavik versus Akureyri: The Gap in Numbers
Several datasets allow for quantifying the cost difference between Reykjavik and Akureyri, often described as the country’s “second city.” Overall, the cost of living in Reykjavik is about 10% higher than in Akureyri, and housing expenses specifically are about 8% higher.
The following comparisons summarize some of the observed rental gaps:
| Type / Location | Reykjavik (ISK/month) | Akureyri (ISK/month) | Akureyri Advantage |
|---|---|---|---|
| T1 City Center | 242,119 to 290,952 | 159,347 to 220,000 | 14 to 24% cheaper |
| T1 Outside Center | 221,517 to 255,750 | 144,593 to 220,000 | ~14% cheaper |
| T3 Outside Center | 333,889 | 263,000 | ~21% cheaper |
The average rental ranges in Akureyri confirm this hierarchy:
| Type of Housing | Average Monthly Range (Akureyri) |
|---|---|
| Studio / 1 Room | 130,000 to 210,000 ISK |
| 2 Rooms | 190,000 to 270,000 ISK |
| 3 Rooms and more | 250,000 to 350,000 ISK |
A studio can sometimes be found for around 80,000 ISK, even though estimates for expatriates in the center are more in the range of 120,000 to 200,000 ISK. A two-room apartment rents for a minimum of around 140,000 ISK, with a three-room apartment often fluctuating between 200,000 and 350,000 ISK.
The average rent per square meter in Akureyri is a little over 3000 ISK, compared to over 4000 ISK in Reykjavik.
Purchase Prices: A Second City Truly More Affordable
On the sales market, the gap between Reykjavik and Akureyri materializes even more clearly. Data per square foot indicate that buying in the center of Akureyri costs about 18% less than in the center of Reykjavik, while in the outskirts, the two cities are almost at the same level.
| Location | Purchase Price Center (per sq ft, ISK) | Purchase Price Outskirts (per sq ft, ISK) | Gap with Reykjavik |
|---|---|---|---|
| Reykjavik | 90,579.71 | 74,074.30 | Reference |
| Akureyri | 74,321.81 | 74,321.81 | –17.9% in center, +0.3% in outskirts |
Other sources place prices per square meter around 410,000 ISK in Akureyri, compared to over 600,000 ISK in Reykjavik. In euros, this gives about €3,150/m² in the second city, versus nearly €5,000/m² in the capital.
For a “typical” 100 m² home, the translation into absolute value is telling: while an apartment would sell for around €500,000 in Reykjavik, a similar product costs around €300,000 in Akureyri according to some estimates. Vacation homes or small cottets follow a similar logic, with average prices around €250,000 near Akureyri, versus €350,000 around the capital.
Other Regional Towns: Selfoss, Ísafjörður, Húsavík
Beyond Akureyri, the main regional towns – Selfoss in the south, Ísafjörður in the Westfjords, Húsavík in the north – display price levels lower than the metropolis, but with important nuances.
A summary table synthesizes rough orders of magnitude in euros for typical properties around the year 2023.
| Town | Residential House ~100 m² | Vacation Home 50‑60 m² | Land 500‑1000 m² |
|---|---|---|---|
| Reykjavik | €500,000 | €350,000 (outskirts) | €150,000 |
| Akureyri | €300,000 | €250,000 | €100,000 |
| Ísafjörður | €280,000 | €220,000 | €90,000 |
| Selfoss | €320,000 | €240,000 | €95,000 |
| Húsavík | €260,000 | €200,000 | €85,000 |
Selfoss, for example, is often presented as a more affordable alternative in the peri-urban area of the capital region, but some isolated cases show very high rents when supply is extremely limited: one data point indicates a T1 outside the center at over 360,000 ISK monthly, proof that certain niche markets can become very tight locally.
At the level of price per square meter, the gaps remain significant:
| Area | Average Price per m² (ISK) | Average Price per m² (USD) |
|---|---|---|
| Reykjavik | 618,000 | ~$4,800 |
| Akureyri | 410,000 | ~$3,150 |
| Selfoss | 330,000 | ~$2,500 |
| Westfjords | 196,000 | ~$1,500 |
The Westfjords illustrate the low end of the national range: prices there are the lowest, partly because the population is sparse, some villages have lost inhabitants, and economic opportunities are more limited. Historically, municipalities in this region have even offered land for free to attract new residents.
Capital vs. Rest of the Country: The Geographic Price Gradient
By broadening the focus beyond just towns, the price hierarchy between the capital region, its extended outskirts, and rural areas is very clearly visible in the statistics.
Three Major Price Zones at the National Scale
Data from January 2025 highlight very differentiated average levels depending on the region:
| Zone | Average Price All Properties (ISK) | Average Price (USD) | Annual Change |
|---|---|---|---|
| Capital Region | 87,043,296 | 619,746 | +11.06% |
| Capital Region Outskirts | 64,603,678 | 459,976 | +7.64% |
| Rural Areas | 52,442,008 | 373,386 | +3.61% |
Breaking down by property type, we see that single-family houses appreciate faster than apartments, especially outside the capital:
| Zone | Type | Average Price (ISK) | Annual Change |
|---|---|---|---|
| Capital | Single-Family House | 145,296,331 | +11.67% |
| Capital | Apartment | 75,977,558 | +7.69% |
| Capital Outskirts | Single-Family House | 79,293,794 | +10.75% |
| Capital Outskirts | Apartment | 53,588,988 | +5.09% |
| Other Regions | Single-Family House | 61,195,566 | +12.95% |
| Other Regions | Apartment | 45,065,287 | –2.84% |
Prices for single-family houses are rising very strongly outside the capital, while provincial apartments are correcting downward. This reflects a dual movement: on one hand, demand for family homes in the outskirts and small towns is increasing (telecommuting effect, search for space, more contained prices than in the capital); on the other hand, some regional apartment markets are more fragile, even stagnant, when local demographic activity does not follow.
A Partial Reversal in Favor of the Regions
The latest monthly data show that in 2025, price curves are no longer moving in the same direction everywhere. In May, for example, housing prices fell by about 1.1% month-on-month in the greater Reykjavik region, while they increased by 1.3% in the rest of the country. Year-on-year, prices in other regions are gaining over 9%, nearly double the increase (about 4.6%) recorded around the capital.
Annual price increase for condominiums in regions outside the capital in Iceland.
Renting: A Price Gradient Between Large Cities and Small Towns
Comparing rents between towns allows for refining the map of pressures. The HMS rent index, calculated per square meter, offers a good tool for direct comparison.
The National Scale of Rent per Square Meter
In February 2025, the national average rent for new contracts is around 3,639 ISK/m², with significant variations depending on the town:
| Location | Average Rent (ISK/m²) | Average Rent (USD/m²) | Annual Increase |
|---|---|---|---|
| Iceland (Average) | 3,639 | 25.90 | +8.5% |
| Capital Region | 3,937 | 28.02 | +9.5% |
| Reykjavík | 4,041 | 28.76 | +9.8% |
| Kópavogur | 3,810 | 27.12 | +8.9% |
| Hafnarfjörður | 3,646 | 25.95 | +8.4% |
| Akureyri | 3,026 | 21.54 | +5.1% |
| Reykjanesbær | 3,462 | 24.64 | +10.4% |
This grid clearly shows three levels: Reykjavik and the capital region at the top, major regional towns (Akureyri, Reykjanesbær) in a second block slightly below, then small towns and rural areas in a third group, at a significantly lower level but catching up quickly in some tourist or industrial regions.
Average Rents by Home Size
Nationally, the average rent per unit for new contracts is about 263,000 ISK. Average rents by size illustrate the weight of the T2 and T3 market for households:
| Type of Housing | Average Rent (ISK/month) | Average Rent (USD/month) |
|---|---|---|
| 1 Room | 186,861 | 1,330 |
| 2 Rooms | 241,645 | 1,720 |
| 3 Rooms | 284,042 | 2,022 |
In the capital region, these amounts are systematically higher, whereas in medium-sized towns like Akureyri, they are about a quarter lower. However, the difference in apartment sizes nuances this observation: apartments on the outskirts of Reykjavik or in satellite municipalities are often larger for a comparable rent level, which reduces the apparent advantage of the provinces in terms of cost per square meter.
Buy or Rent: Comparison Between Towns for Investors
To compare the appeal of different Icelandic towns from an investor’s point of view, it’s not enough to look at raw prices. Rental yields, additional costs, and the dynamics of demand are decisive.
Rental Yields: Reykjavik vs. Rest of the Country
Nationally, the average gross rental yield is around 5.2%. In Reykjavik, this yield is slightly lower, around 4.9%, a sign of a highly valued market but one where rents have also risen sharply. In some areas outside the capital – notably tourist towns or those with strong demographic growth – yields can be higher, often at the cost of lower resale liquidity.
To give some reference points:
| Indicator | Reykjavik | Iceland (Average) |
|---|---|---|
| Average Gross Yield | ~4.88% | ~5.20% |
| Average Price per m² (Purchase, 2022) | ~529,000 ISK | ~€4,405 (≈ national scale) |
| Average Rent per m² (2025) | 4,041 ISK | 3,639 ISK |
Where Reykjavik offers security, market depth, and economic dynamism, secondary towns can offer a better yield/entry-price combination, especially in regions where tourism is a structuring factor (Húsavík, towns on the south coast, etc.) or where urbanization is progressing rapidly (Selfoss, Reykjanesbær).
Additional Costs: Services, Taxes, and Fees
Regardless of the town, investors must account for several cost items that are relatively uniform across the territory, although some nuances exist.
Monthly utility charges for a 700-square-foot apartment in Akureyri amount to about 12,400 ISK.
On the tax side, there is no uniform national property tax; each municipality applies its own rate, generally between 0.18% and 1.6% of the assessed value, depending on the property’s use. For residential housing, the standard rate is typically around 0.18%, regardless of the town. Rental income is taxed at a base rate of 22%, but a specific rule exempts 50% of rents when an individual rents out at most two properties, effectively reducing the tax rate to 11% on this income.
Transaction costs for a buyer can amount to up to 2.7% of a property’s purchase price.
Financing: High Rates Everywhere, Similar Conditions Between Towns
Differences in mortgage rates between Icelandic towns are marginal: it is the major national banks and pension funds that set the conditions, and these apply quite uniformly. Rates for a 20-year fixed-rate loan hover around 9 to 10% for non-indexed loans, and 4 to 5% for inflation-indexed loans.
Data show, for example, that the average rates for new non-indexed variable-rate loans were 10.28% in early 2025, 9.22% for non-indexed fixed-rate loans, 4.87% for indexed variable-rate loans, and 5.10% for indexed fixed-rate loans. These levels are considered “abnormally high” compared to European standards, with comparisons showing ICELAND among the countries with the highest mortgage credit costs.
For a foreign investor, these rates apply regardless of the town where the property is located; the choice to target Reykjavik, Kópavogur, Akureyri or a small town in the fjords changes the entry price and the expected rent, but not fundamentally the financing cost.
Tourism, Airbnb, and Differentiated Pressure on Towns
The rise of tourism plays a key role in the geography of prices, especially in the most visited towns and the most spectacular regions.
Reykjavik and the South Coast: High Pressure Linked to Visitor Accommodation
With about 2.2 to 2.26 million annual tourists and projections of 2.5 million in the medium term, Iceland’s tourism economy carries significant weight. It represents nearly 8.7% of GDP, including 2.6% for accommodation alone. Most of these visitors pass through Reykjavik and the south coast, where nearly 80% of tourists spend at least part of their stay.
The conversion of rental housing into short-term tourist accommodation via platforms like Airbnb contributed to raising real estate prices by about 2% per year for three years, or nearly 15% of the total increase over that period. This practice reduces supply for residents and increases expected yields, encouraging purchases for seasonal rental.
Reykjavik is the main stage for this effect, but towns on the south coast, some villages near the most visited sites, and localities like Húsavík (whale watching) also experience this pressure.
Recent Readjustments and Effects on the Rental Market
Faced with pressures, public authorities have begun regulating short-term tourist rentals, by limiting the number of days allowed without a specific permit and conducting control operations on undeclared listings. In the capital, there has been a partial decline in the Airbnb stock: the number of apartments offered on this platform in Reykjavik fell by about 29% over a six-month period, notably due to the opening of new hotels and a tightening of municipal regulations.
A portion of the housing is returning to the long-term rental market. However, the impact on prices remains modest in the short term, because rental demand is very strong and the catch-up effect does not sufficiently compensate for years of under-construction.
Outlook: How Gaps Between Towns Might Evolve
Current trends suggest that price differences between Icelandic towns will not disappear, but will rather restructure around a few major axes.
In the capital region, the combination of a larger housing stock, a constant influx of population, central economic weight, and tourist appeal should keep Reykjavik and its neighbors (Kópavogur, Hafnarfjörður) at the top of the price scale. Even though high interest rates have recently extended sales times and contributed to a slight monthly decline in prices, the fundamental pressure on supply remains significant.
Regional towns such as Akureyri, Selfoss, Reykjanesbær, or Egilsstaðir are supported by local growth, good levels of services (hospitals, schools, airports), and sometimes sustained tourist activity. They are thus expected to continue closing part of their gap with the capital. This trend is confirmed by recent figures, which show an annual price increase almost twice as fast in other regions as around Reykjavik.
Very rural areas or regions facing depopulation (some sectors of the Westfjords or Eastfjords) should retain significantly lower prices, even if the rise of eco-tourism and more “remote” lifestyles could, in the long term, support certain micro-markets.
For an Icelandic household, the choice between the capital region and other regions involves a trade-off: in Reykjavik, the cost of living and real estate are higher, but salaries are stronger and the supply of specialized services and jobs is denser. In other regions, real estate prices are more accessible, but the supply of specialized jobs may be lower. For an investor, the trade-off is different: Reykjavik offers security and high liquidity for a slightly lower yield, while regional towns can offer better gross profitability, but on a narrower market more sensitive to local shocks.
In all cases, ICELAND presents a constant trait: whether we are talking about Reykjavik, Akureyri, Selfoss, or Ísafjörður, housing remains expensive relative to income, in a country where the cost of living far exceeds the global average and where the beauty of the landscapes has a very real price on the real estate markets.
A French business owner, around 50 years old, with a well-structured portfolio already in Europe, wanted to diversify part of his capital into rental real estate in Iceland to seek yield and exposure to the Icelandic krona (ISK). Allocated budget: €400,000 to €600,000, without using credit.
After analyzing several markets (Reykjavík, Kópavogur, Hafnarfjörður), the chosen strategy consisted of targeting an apartment or small residential building in a dynamic neighborhood of Reykjavík, combining a target gross rental yield of around 6–7% – keeping in mind that «the higher the yield, the greater the risk» – and medium-term appreciation potential, with a total ticket (acquisition + fees + possible renovations) close to €500,000.
The mission included: market and neighborhood selection, connection with a local network (real estate agent, lawyer, tax specialist), choice of the most suitable structure (direct ownership or an Icelandic company), and definition of an international diversification plan over time, while managing legal, tax, and rental risks.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
