With its icy landscape and fame attached to its now famous financial collapse, Iceland may not be the obvious target for real estate investors.
But according to property professionals foreign property buyers are looking to the island as prices have plummeted and the native population doesn’t have the money to invest.
Alongside its economy, Iceland’s real estate market boomed for much of the last decade. Since the economic collapse, however, it has ground to a halt.
‘During the boom times everything sold. Nothing stopped for a minute,’ said Fjola Kristinsdottir, an agent at Stadur Fasteignasala, in Selfoss.
Figures from Statistics Iceland, which compiles data on Iceland’s economy, show that residential property prices increased 153% in just one year from March 2000 to March 2008.
In the capital city Reykjavik and its surroundings, where two-thirds of Iceland’s population lives, prices rose from an average of $57 a square foot in 1998 to $191 per square foot at the peak of the market.
Now they have fallen to around $178 a square foot.
Now people can’t afford to buy because of unemployment and uncertainty about the future. Those who do have to move are swapping instead. The newspapers are full of adverts from property owners who need to move seeking someone in a similar situation who also need to move in the hope that they can exchange.
So there are an increasing number of inquiries from abroad including Russia, Germany and Scandinavia. Prices have dropped around 40%, according to Thuridur Kristin Halldorsdottir, a real estate agent and lawyer based in Reykjavik.
Those with the funds to buy can also drive a hard bargain as property rarely goes for the asking price and sellers are accepting offers way below.
The recent devaluation of the krona has also made Iceland more attractive to foreign buyers. Not only have prices fallen but foreign buyers get much more for their money because of the exchange rate, explained Halldorsdottir.