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Iceland
Financial OverviewOverview Taxes and Costs Buying Guide Inheritance Living There Useful LinksCountry Statistics DirectoryRealtorsAccountantsLawyersProperty SearchAll PropertyResidentialCommercialLand for SaleLuxury HomesFor Sale by OwnerGlobal StatisticsHouse PricesRegional StatisticsRental Income TaxCapital Gains TaxPrice Change 1 yrPrice Change 5 yrsPrice Change 10 yrsGDP Per CapitaGDP/Cap Growth 1 yrGDP/Cap Growth 5 yrsEconomic FreedomEc. Freedom 5 yrsCompetitivenessProperty Rights IndexCurrency +/- Value Last Updated: Jan 10, 2012 Tweet
Strong housing market recovery in Iceland!
Iceland’s house price index rose 6.28% (1% inflation-adjusted) over the year to October 2011, according to Statistics Iceland. This was the ninth consecutive month of annual house price rises since prices started to fall three years ago. House prices are now just 7.6% below the levels seen in Q1 2008.
Iceland’s house prices started falling in October 2008, when the Central Bank raised its key policy rate by 500 basis points to 18%. The hike was implemented to stabilize the Krona, and was one of the International Monetary Fund’s conditions for granting a US$2.1-billion loan, sought when Iceland’s three major banks all collapsed in the span of one week. Iceland’s house prices had previously risen by 16% between Q3 2006 and Q1 2008.
From January to October 2011, the number of sales transactions in the country’s major metropolitan areas increased by 60.3% from the same period last year. In addition, the total value of real estate transactions almost doubled to ISK108.83 billion (US$903 million) from ISK66.13 billion (US$548.5 million) over the same period.
The collapse of the banking industry in 2008 threw the economy into recession, with GDP shrinking by 6.9% in 2009 and by another 3.5% in 2010.
However, the Icelandic economy is now recovering, thanks to increased exports, consumer spending and fixed investments. In the third quarter of 2011, annual real GDP growth was 4.8%, according to Statistics Iceland. Iceland’s economy is projected to expand by 2.6% in 2011 and 2.4% in 2012.
Standard & Poor’s has recently raised its outlook on the country from negative to stable.
Iceland’s central bank, Sedlabanki, announced in early-December 2011 that it will hold the key rate unchanged at 4.75%, as the economy is recovering and inflation is above target. The key rate was raised by 25 basis points in November 2011, the second rate hike since August 2011, as the government tried to shield the krona from shocks fueled by the ongoing Eurozone debt crisis.Consumer prices rose by 5.2% y-o-y to November 2011, more than twice the central bank’s target. Iceland’s inflation rate was 5.4% in 2010, from an average of 12.2% from 2008 to 2009 and 4.7% from 2000 to 2007.
Iceland’s economic and housing market recovery is expected to continue, though the euro debt crisis will likely slow growth.
RENTAL YIELDSLast Updated: Dec 31, 1969
Research on-going.
TAXES AND COSTSLast Updated: Jun 29, 2011
Rental income taxes are moderate in Iceland
Rental Income: Nonresidents earning rental income are taxed at a flat rate of 18. Only 70% of the gross rent is taxable for income earned from leasing residential properties.
Capital Gains: Capital gains are taxed either as business income at 24.10% for assessment year 2010 (tax year 2009), or investment income at 18%.
Inheritance: Inheritance, tax is imposed on the share of the beneficiary at 10%, with an exemption for the first ISK1 million (?6,012) of the share.
Residents: Residents are taxed on their worldwide income.
BUYING GUIDELast Updated: Aug 01, 2007
Very low transaction costs in Iceland
Round-trip transaction costs are very minimal from 1.92% - 2.52%. The buyer shoulders all costs when buying property, which include real estate agent's fee, stamp duty, and registration fee.
LANDLORD AND TENANTLast Updated: Dec 31, 1969
Research on-going.
ECONOMIC GROWTHLast Updated: Jan 10, 2012
Healthy economic growth in 2011 and 2012
Iceland, with a population of only 323,000, is one of the wealthiest and most developed countries in the world. GDP per capita was US$39,025 in 2010, according to the IMF. The small country has low taxes compared to other OECD countries.Iceland’s economy is heavily dependent on fishing, which provides about 40% of export revenues and employs 7% of the total workforce. However in the past several years, the country diversified into manufacturing and service industries.
From 2004 to 2007, Iceland’s average real GDP growth was 6.4% annually. But the economy fell into deep recession when three of its largest banks—Glitnir, Landsbanki, and Kaupthing—collapsed in 2008, defaulting on US$85 billion of debts.
Iceland’s external debt ballooned to ISK14.34 trillion (US$118.7 billion) in 2008, up by 93% from a year earlier. It further rose to ISK15 trillion (US$120.4 billion) in 2009.
These figures are huge compared to Iceland’s 2009 GDP of US$12 billion. In the third quarter of 2011, the country’s external debt fell slightly to ISK13.6 trillion (US$113 billion), according to the Central Bank of Iceland.
Iceland’s economy is now recovering, mainly driven by increased consumer spending, fixed investments and export revenues. In the third quarter of 2011, annual real GDP growth was 4.8%, according to Statistics Iceland. Iceland’s economy is expected to expand by 2.6% in 2011, and 2.4% in 2012.
Consumer prices rose by 5.2% during the year to November 2011, more than twice the central bank’s target. Inflation was 5.4% in 2010, down from the 12.2% average during 2008 to 2009, but higher than the 4.7% average prevailing from 2000 to 2007.
Unemployment is expected to fall to 7% in 2011 and 6% in 2012, from an average of 8.1% in 2009 and 2010, according to the IMF. During the period 2000 to 2008, the average unemployment rate was just about 1.97%.
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