Overview of the market in Iceland

No secret, Iceland is a costly place to live. After the 2009 recession, domestic prices rose as the country became a world tourism destination and supply of housing was limited. But, in the last few years, prices began to cool as developers rushed to build new buildings in and around the capital region. The market struck again last year when WOW Air, one of the two main airlines in Iceland, shut down, damaging the tourism market. According to Statistics Iceland, the national residential price index rose by about 4.2 percent over July 2018, marking its slowest growth in five years. doha property finder

Asdis Osk Valsdottir, Husaskjol Real Estate's Managing Director, said that, before the pandemic a house in Selfoss could sell between 40 and 50 million crowns, the same as a three-bedroom house in Reykjavik. Houses in the capital area currently cost between 80 and 110 million kronur ($590,000-$800,000) and apartments between 50 and 64 millions kronur ($365,000-$470,000), according to Iceland's National Registry.

On 28 Feb, when the first case of coronavirus was confirmed in Iceland, officials had already prepared an aggressive national testing, quarantine and contact tracking programme. The island nation with approximately 360,000 inhabitants has never completely shut down, although it has restricted large meetings and certain industries.

By August 4, only 1,915 Covid-19 and 10 deaths had been reported by Iceland according to the World Health Organization.

Despite the country's success in controlling the virus, its tourism sector was further disrupted by the closure of borders, threatening its housing market in turn. With many foreigners unable to enter today and many local people not traveling abroad, more Icelanders explore the apartment and the summer home markets, which are both increasing in sales. On June 15 Iceland's decision to reopen its tourism boundaries partially added fuel, creating 'even more lively than usual summer market,' Mr Stefansson said. (Iceland does not allow American visitors, together with European nations, except if they have a romantic relation with an Icelandic citizen and can prove that they have previously lived together.)

The brokers have been hosting in-person demonstrations and open houses with staggering arrivals with masks, gloves and hand sanitizer, said Gretar Jonasson, managing director of Felag Fasteignasala, Iceland's Realtors Association. During March and April, sales fell by 30-40%, but bound up in May as local buyers returned to the market.

Ms. Valsdottir has said that in the past three months she has been more busy than at any time in her 17-year career. "I didn't expect to say that in March," she said, "but by July 1 I sold in total the same quantity of properties as I sold in total last year."

The only reasons for Iceland's housing market is not domestic travel and summer home sales. Last fall, the newly-appointed head of the department of financial stability of the Central Bank of Iceland lowered its market rates by 4.5% to 1.7% after WOW Air collapsed. The central bank rate now stands at 1%. The resulting rise in buyers – now almost 30% of the market – has given life back to the market, says Olafur Sindri Helgason, the Iceland's chief economist, housing and construction.

"The most significant change we see is the number of listings being removed from the market, which usually indicates the selling of the property," he said. "We see a huge increase in these numbers across the country, almost 50% higher than last year."

The low rates have helped keep the housing market in Iceland stable, but its future remains largely dependent on its tourism industry. Mr. Helgason said that if unemployment continues to grow, purchasing power and house prices could fall quickly.

"Economic uncertainty here will likely influence local and foreign buyers' decisions over the coming years," he said. "Furthermore, the winter is coming and then we do not know what is going to happen."

Who's buying in Iceland

Most foreign buyers in Iceland have been European since the start of the tourist boom, many from Britain, France and Scandinavia, Stefansson said. Most foreign buyers of his company are looking for second-hand apartments in downtown Reykjavik or rural properties.

Ms. Valsdottir said that her external customers do the same, adding that the market is increasingly interested in North Americans. She works with a large number of Canadians and U.S. citizens.

Basics Buying

Foreign buyers in Iceland must first request permission from the Minister of Justice of the country via an online application, except for European citizens. Ms. Valsdottir stated that in most cases, rights of property are granted while the prospective purchaser operates in Iceland.

After approval, the purchaser works directly with the seller's broker because the law of Iceland requires one agent to represent both sides of the deal. Lawyers make up approximately 30% of the country's immobilizers, Jonasson said.

A notary shall review all the contracts signed with the stamping duties costing the buyer about 0.8 percent of the property's registered value. Mr Stefansson said the price per document of this property is 2,500 kronur ($18).

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