Iceland is expensive. Of course not so much if we live and work there but still.
Our situation depends on two factors: where we live and what we do. Naturally, costs of living in Reykjavik are much higher than in smaller towns but so are the salaries. Pattern as everywhere.
Renting a flat
The average rent for a studio, one-bedroom apartment (30m2) in Reykjavik is around 130.000 ISK ($1.250 and €1.070) per month. Similar apartment in southern part of Iceland costs 2/3 of this price and in West fjords ½ the price. In Akureyri (so second biggest city) prices are like in the south – constitute 2/3 of Reykjavik’s prices.
The rent for two-bedroom apartments (around 50-60m2) in capital starts at 200.000 ISK ($1.900 and €1.650) per month. And is similarly to studios’ prices cheaper in other parts of the country.
For actual prices check here http://fasteignir.visir.is/#rent or here http://www.mbl.is/fasteignir/leiga/. And for calculation of square meter price here https://www.skra.is/um-okkur/frettir/frett/2017/11/17/Upplysingar-um-leiguverd-ibudarhusnaedis/.
Recently the prices went up even higher since a lot of landlords switched from long term rent to short lease by using eg. Airbnb for tourists. Those who stayed on the long-term market could in result raise their prices as the competition decreased.
Besides, the prices of Airbnb rates also skyrocketed. Actually as the journalists from The Reykjavik Grapevine newspaper say Iceland has the highest rates for Airbnb accommodation in the world! Around £112 per night. Worth mentioning that Sweden being second is way cheaper (£82 per night) or 3rd Andorra (£79 per night).
What’s even more interesting, Icelandic law forbids Icelanders to rent out their homes on Airbnb for more than 2 million ISK and for more than 90 days per year. But that gives more than £112 per night, since 2 million ISK/90days gives on average 22.222 ISK per night whereas £112 is only over 15.000 ISK. That gives even more space for overuse and margin to retain 1st place.
Buying a flat – mortgage
With sky high rental prices, monthly instalments for mortgage look really tempting. There are two slight problems – we need to have approx. 20% of own contribution and we need to pass bank’s verification. Since the crisis in 2008 banks are more strict and often require almost pristine credit history and very good employment conditions.
It costs 22.400.000 ISK ($215.000 and €179.000), 20% is 4.500.000 ISK ($43.200 and €35.900) so that’s what you need to put in first to get from bank remaining 17.900.000 ISK ($172.000 and €143.000). Depending on the type of mortgage you choose you have to pay from 84.000 ISK ($810 and €670) to 105.000 ISK ($1010 and €840) per month.
84.000 ISK or even 105.000 ISK is almost half of what landlords call for their rent! Most difficult is to come up with the 4,5 million to start, though. You can get extra loan for 2 million ISK and pay additional 23.000 ISK ($220 and €180) per month for that.
Buying a property in Iceland
It’s worth noting that if considering buying a real estate for ourselves (as a private individual) then we either need to be an Icelandic citizen or have our legal residence in Iceland. Same in terms of companies – both with limited and unlimited liability, it’s again either an Icelandic citizenship or an individual domiciled in Iceland for at least 5 years. In terms of corporations – 4/5 of the share capital must be owned by Icelandic citizens.
For residents and legal entities domiciled outside EEA or EFTA it’s more complicated. Large scale investment project can count on exemptions from restriction via standard clauses in an investment agreement with the Minister of Industry and Commerce.
Icelanders do their best to protect their land and estates from being owned by outsiders. Good, it’s not a big country after all.
Costs of food
Icelandic prices of food, both in restaurants and in general, are surprisingly high. It’s because of Iceland’s small population and thus the small market with not much competition. Also, employment costs are very high.
Personally I used to spend 40.000 ISK ($380 and €330) on food per month while living in the south. 14.000 ISK for breakfast and supper products, 18.000 ISK for lunch and 8.000 ISK for snacks. What I observed is that meat, yellow cheese, tea and seasonings are extremely expensive:
Gouda cheese – 500 ISK
Sausages 10 pcs – 775 ISK
Beef meat – 1900 ISK
Tea – 200 ISK
Coffee - 860 ISK
But fish and vegetables are cheap 🙂
Tuna in can – 190 ISK
Salmon – 2500 ISK
Bananas 10pcs. – 350 ISK
Cocktail tomatoes – 400 ISK
Lettuce – 300 ISK
Red paprika – 150 ISK
Pasta – 400 ISK
Tomato sauce – 300 ISK
Eggs 10pcs. – 650 ISK
Peanut butter – 270 ISK
Bread – 250 ISK
Milk – 700 ISK
Cereals – 700 ISK
Can of beer 500ml - 290 ISK
Food prices are similar in every region but the selection of products in the capital might be bigger though.
If you’d like to check prices of food for families check this website http://www.ums.is/reiknivelar/framfaersluvidmid/
Costs of living in the city
In terms of eating out, prices are again quite high but luckily there’s no rule of tips as they are included in the service.
Some examples of prices in the Reykjavík area:
- Getting from the Keflavik Airport to Reykjavík by bus costs around 2.700 ISK
- Going to the movies costs around 1.600 ISK
- A beer in a bar costs around 1.500 ISK
- A bottle of wine in a restaurant costs from 2.300 ISK upwards
- Dining out starts with 2.500 ISK and upwards
- The price of petrol is 200 ISK per litre
So on average a single person in the capital spends approximately around 150.000 ISK ($1.450 and €1.230) per month on food, clothes, entertainment, medical expenses, transport, communication and other services.
To have a full picture we shall add average income to calculated expenses.
An average salary of a general worker (eg. cleaner) and also the minimum salary is 280.000 ISK ($2.700 and €2.300) per month, for a skilled worker (eg. chef) it’s 450.000 ISK ($4.300 and €3.700) and for a professional (eg. architect) 850.000 ISK ($8.100 and €7.000). Given amounts are before tax (36,94% for salaries up to 655.850 ISK monthly; if salary is higher the tax is 46,24%).
What’s left - savings
To wrap up.
First case – single semiskilled worker renting studio
Renting a studio in Reykjavik = 130.000 ISK ($1.250 and €1.070) per month
Groceries, clothes and city life in Reykjavik = 150.000 ISK ($1.450 and €1.230) per month
Total expenditures = around 280.000 ISK ($2.700 and €2.300) per month
Average salary in capital = 450.000 ISK ($4.300 and €3.700) minus tax = 322.746 ISK
SAVINGS = 42.000 ISK ($390 and €340)
Second case – couple of professionals paying off two-bedroom flat
Mortgage instalment for 2-bedroom flat in Reykjavik =200.000 ISK ($1.900 and €1.650) per month
Groceries, clothes and city life in Reykjavik for two = 250.000 ISK ($2.400 and €2.030) per month
Total expenditures = around 450.000 ISK ($4.300 and €3.700) per month
Average salary of a professional in capital = 850.000 ISK ($8.100 and €7000) minus tax gives around = 561.254 ISK times two = 1.122.508 ISK
SAVINGS = 700.000 ISK ($6.850 and €5.600)
Summing up, depending on many factors the costs of living in Iceland can constitute from 40 to 90% of earned salaries! Reykjavik life is no picnic, that’s why lots of people lives in Reykjavik area or Selfoss (50km away) and commutes every day.