Iceland has become a popular hotspot for expats and tourists from all over the world. From a plethora of untouched wilderness to the majestic nature, geological marvel, and a wide range of activities to try out, it’s easy to see why there’s an enormous influx of visitors here. The locals are friendly and welcoming, not to mention, they speak fluent English. But, before you start packing your suitcase, it’s important to know about the cost of living in Iceland. You don’t want to settle in a foreign land only to realize you don’t have enough money to make it through the first month.
Can you afford to live in Iceland in 2020? First off, this country is notoriously expensive. As for why is Iceland so expensive, it’s a combination of economics, geography, and politics. You need at least €950 for monthly expenses (excluding rent), while a family of four needs to budget for about €3,550/month (excluding rent). The exact cost of living will depend on where an individual chooses to live, their lifestyle, the size of their household, and the kind of experiences they’re looking to get in Iceland.
If you’re thinking about moving to Iceland you might be wondering, “Should I move to Iceland despite the high living costs?” Well, of course. Iceland offers high living standards. It ranks incredibly high in several areas, including health, safety, the environment (it has very low pollution levels), and life satisfaction among other things. Drug use and crime rates are quite low compared to most European countries. Its economy has also bounced back quite well from the 2008 financial crisis, with unemployment rates going as low as 1%. Iceland has become a European hub for travel, adventure, and culture. That’s why many are so taken by it that they consider relocating here to work, pursue a degree, or even retire. In this text, I’ll cover common living expenses in Iceland to help you prepare financially for your big move to Iceland.
Note that the currency used in Iceland is the Icelandic ‘krona (ISK). The costs of this text are in Euros. Exchange rates (October 2019): 1 EUR = 138.31 ISK.
Monthly Cost Of Living in Iceland
The housing market is very competitive and costly in Iceland. Given that a secure home is a necessity for every family, it’s no surprise that the high housing prices contribute to high living costs in this country. If you’ll be renting, expect to spend about €1,355 for a one-bedroom apartment in the city center. A couple with kids will need a bigger house, probably a three-bedroom apartment, which costs about €2,075/month.
For those who plan on staying in Iceland permanently, purchasing a house is an option as well. Despite the fact that real estate prices have also risen sharply in recent years, the sky-high rental prices make monthly installments for mortgage seem like an affordable option. The average cost of buying a residential property in the country’s capital ranges from €289,200 – 431,500. Outside of the capital, property prices average at about €3,204/square meter.
Houses in more rural places are cheaper than those in Reykjavik. There is, however, less access to good jobs and local amenities in these areas compared to the capital.
This is one area that Iceland really cuts consumers some slack, considering it harnesses lots of energy from geothermal and hydropower sources. Expect the basic monthly utilities for an 85 sq. meter apartment to cost about €87.
Food prices are also high. A single person will spend from €300-580/month on basic groceries. You can keep the cost down by eating at home as often as possible. Unlike housing costs, food prices are a bit similar in every region. The only difference is there’s a wider selection of products in the capital.
The easiest and most popular mode of transport in Iceland is using a car. Note that a liter of gasoline costs €1.62 and a new Toyota Corolla costs about €29,300. Forgoing the car is an affordable option if you live in the capital. The transport infrastructure is well developed and reliable in and around the capital region. Expect to spend about €89 on a monthly travel pass. Consider flying if you’re traveling long distances.
In addition to these constant costs, families will also have to budget for several variable costs. For instance, those with kids will have to budget for education and childcare costs. Entertainments costs will depend on an individual’s lifestyle and the kind of experience they’re looking to get in Iceland.
To wrap-up, a single person needs around €2,300/month, a couple of needs €3700/month, while a family of four need €6270/month to live a decent life in Iceland.
Why Is Iceland So Expensive?
As mentioned earlier, several things contribute to the high living costs in Iceland. This includes:
The country’s currency
The Icelandic ‘krona is one of the smallest currencies in the world as it only serves the roughly 360,000 Icelanders and their visitors. Due to its tiny size, it tends to fluctuate a lot and can quickly get cheaper or expensive against international currencies. The Krona has, however, strengthened against strong international currencies. This has caused the purchasing power of the Euro and the US dollar to decrease.
Given that Iceland is very close to the Arctic Circle, its climate isn’t conducive for farming. The growing season is quite short and only allows for a few native crops. This means that the majority of food products are imported, so are most other goods. Secondly, this island is located far in the middle of the North Atlantic Ocean. This means that goods are transported a long way –usually from the U.S., the UK, Norway, and Germany. The cost of importation, including tax, gets passed on to the consumer. Goods in Iceland have steadily been getting pricier. First, it was due to inflation, and then the wages got higher to keep up with the price increase. Since employees earn more, they generally pay more for goods. This vicious cycle means that prices will keep rising and wages need to continually rise to cover living costs.
As with most countries, Iceland has VAT (value-added tax), which is charged at two rates. There’s the standard rate of 24% and the discounted rate of 11% on certain products such as foodstuff. Those selling goods and services must declare and pay VAT. This ends up being added to the selling price of those items, making everything pricier. Although taxes contribute to the high cost of living in Iceland, they are not the cause. There are many countries with similar high VAT rates like Germany, but they’re not as expensive.
The growing tourism industry
The tourism sector has multiplied fivefold in Iceland since 2010. The country has a population of about 360,000, but it welcomed over two million visitors last year. This is more than six times the total population. It goes without saying that all these people have to compete for the same limited supply of goods, which, in turn, increases prices. The booming tourism industry has particularly increased housing shortage as more tourists need somewhere to stay. With such an increase in demand, prices are bound to blow out of proportion.
Due to Iceland’s limited population, its market tends to be small and interlinked. This has led to a lack of competition in many industries. For instance, the retail market is split between three big companies, which own and operate most supermarkets and several other stores. This lack of competition makes it possible for the major players to set prices. Small stores in rural areas are even pricier since they have to factor in transportation costs.
Salaries in Iceland
Are you considering employment or do you have a job offer in Iceland? Well, given how expensive everything seems to be in this country, it’s worth knowing the salaries offered here so you can negotiate for decent pay.
As one of the wealthiest countries in the world, it’s safe to say that Iceland offers some of the highest salaries in Europe. This is set to increase even higher in the future years. Even with a high cost of living, the high purchasing power in this country still makes it an attractive place to be employed.
The average salary in Iceland
The average gross salary in Iceland is currently at about €5,000 per month. This figure includes basic salary, as well as housing, transport, and other basic benefits. After taxation and other deductions, the average person takes home around €2778 net/month. Jobs are usually classified into two: salaried and hourly jobs. Salaried jobs pay a fixed salary regardless of the hours worked while hourly jobs pay per the number of hours worked. In that case, the average salary in Iceland per hour is about €29/hour.
Note that salaries differ drastically depending on the location. For instance, the average monthly net salary is €2,061 in Akureyri, €2,883 in Reykjavik, while Hafnarfjorour offers the highest salaries in the country at around €4,580/month. Salaries also differ between industries, employers, and job titles. Here are the average monthly salaries for some of the most popular jobs in Iceland:
- Accountant: €3,020
- Attorney: €7000
- Administrative assistant: €2557
- Cashier: €2592
- Chef: €3665
- CEO: €11,000
- Dentist: €11,450
- Engineer: €4182
- Nurse: €3645
- Teacher: €3680
The minimum wage in Iceland
Unlike most countries, there’s no official minimum wage in Iceland. This means that there’s no mandatory minimum pay for workers in Iceland. Each profession, however, determines what the lowest possible salary is through collective bargaining agreements or other means of negotiating a fair wage. Even with no universal minimum wage, it’s safe to say that most range from €1,880-€2,170 per month.
Generally, salaries in Iceland range from €700/month (minimum salary) to €22,170/month (maximum salary). The median salary is €5,210/month, meaning half of the working population in Iceland is making more than €5,210/month, while the other half earns less than that. If your salary is above the median and the average monthly salary, then you can be assured of a decent life in Iceland.
Average Monthly Costs of Living in Iceland
Monthly rent for an apartment
As an expatriate, it’s usually more practical and less stressful to rent, especially if you plan on staying in Iceland temporarily. Most Icelanders prefer to buy a house; as a result, about 80% of the property is privately owned. It goes without saying that the rental market is rather small, making demand high and prices considerably higher.
Here’s how rental costs look like in Iceland per month:
|Number of bedrooms||Average price in prime areas||Average price in non-expensive areas (€)|
Of course, there are cheaper options for those moving alone or as a couple. You could rent a single room in a shared apartment for about €700-1000/month. You’ll be able to save money through rent benefits once you’ve lived in the country for six months and have an Iceland social security number.
Consider looking for a house before you move and don’t hesitate if you see one that fits your budget and needs.
The monthly cost for an internet provider
Iceland is among the top countries in terms of internet deployment and use. The most common types of internet connections available here are fibre, ADSL, and VDSL. Speeds are generally higher than the world’s average, with over 60% of connections offering speeds above 100Mbit/s. There are so many internet service providers in Iceland but the most popular ones include:
Síminn: This ISP provides internet connections to about half of Iceland’s population. You can get 50GB worth of data for just €34.71/month, 500GB for €41.22/month, or an unlimited data subscription for €53.52/month. Síminn also has a home package for the entire family, which includes internet, TV service, endless landline, mobile data, and a television app.
Hringdu: They offer different speeds to suit different internet needs; for instance:
- 50Mb/s + 50GB of data = €44.10/month
- 50Mb/s + unlimited data = €54.95/month
- 100Mb/s + unlimited data = €62.19/month
- 1000Mb/s + unlimited data = €69.42/month
Vodafone Iceland: This ISP offers speeds of up to 1000Mb/s, which can only be achieved if you own a network router. If you don’t have a router, live outside the fibre optic areas, or use the ADSL connection, speeds can be up to 100MB/s. Prices vary depending on the amount of data you’re getting. For instance:
- 250GB of data = €32.46/month
- 1000GB of data = €43.30/month
- Unlimited data volume = €51/month
Note that you’ll also be required to pay an access fee of about €24.51 per month.
Those who are visiting for a short while can take advantage of the many Wi-Fi spots available in hotels, cafes, bars, coffee houses, bookstores, and N1 service stations.
The monthly cost for a mobile phone provider
Since mobile phones have become an indispensable part of our lives, it only makes sense that I talk about Iceland mobile network and coverage options. Like most countries, you can choose between prepaid and post-paid plans. Prepaid plans are ideal for those planning to stay for a short while. Credit refill cards are available at most gas stations and convenience stores. Post-paid plans tend to be cost-effective in the long-run.
Having said that, the three main cell phone carriers in Iceland include:
Síminn: As the leading mobile phone provider in Iceland, you’ll get the best coverage with them. Their prepaid starter pack comes with 50 min talk, 50 texts, and 5GB of data for about €21. Their post-paid plans start at about €18.80/month, which offers unlimited minutes and SMS in Iceland and within Europe + 1GB of data.
Vodafone: Experience freedom with their prepaid plan that’s valid for 30 days. For just €16 you get unlimited local calls and SMS + 5GB of data for roaming in Europe. Their postpaid plan starts at €14.39/month and offers unlimited local calls and SMS + 100MB for roaming in Europe or 1GB at home. Alternatively, you can purchase unlimited data + 30GB of data for roaming in Europe + unlimited calls and SMS for €62.83/month
Nova: This third player is the cheapest option but it lacks countrywide coverage. Their prepaid starter pack is available for around €14. Among other post-paid plans, you can get unlimited local calls and SMS + 10GB of data + 5GB of data for roaming in UE for just €15.84
The monthly cost for health insurance
Iceland operates a universal healthcare system to ensure everyone has equal access to quality healthcare. Expatriates will, however, be required to have lived in Iceland for at least six months. This state health insurance covers hospital treatments, emergency care, medical prescriptions, maternity care, ambulance transportation, and more. It also covers sickness benefits in case an injury or illness leaves you unable to work temporarily.
With that being said, until the six months threshold is reached, both expatriates and tourists will have to consider alternative solutions for healthcare. There’s a limited number of private healthcare providers in Iceland that offer services to those who are not entitled to or don’t wish to seek medical treatment from the public sector.
Out-of-pocket medical costs are typically very expensive; as such, it’s best to purchase a travel policy that can cover all eventualities. Visitors from within the EU can use their EHIC to access healthcare services. This, however, only covers basic care. The most ideal solution for the expat lifestyle is to get an international medical insurance plan. Such plans are costly, about €3,000 a year, but they cover virtually all medical eventualities, including repatriation.
Iceland supermarket prices
Locally grown or made food is cheaper, but it may not be to everyone’s taste. Most products are therefore imported, which obviously elevates prices. This also means that products may not be as fresh or high-quality as you’re used to in your home country. The following figures for Iceland supermarket prices will help you budget for your monthly groceries:
- A loaf of bread (500g) – €2.52
- 1 liter of milk – €1.14
- A dozen of eggs – €4.57
- 1kg of white rice – €2.59
- 1kg of local cheese – €12.04
- 1kg of chicken breasts – €14.26
- 1kg of beef round – €21.93
- 1kg of potatoes – €2.02
- 1kg of tomatoes – €3.73
- 1kg of onions – €1.51
- 1kg of apples – €2.17
- A bottle of mid-range wine – €18.08
- 1.5-litre bottle of water – €1.63
The monthly cost for eating out
Half of Iceland is the sea, meaning seafood is the mainstay of the Icelandic diet. You’ll find fresh fish in restaurants, where it’s often boiled, baked, grilled, or pan-fried. Bread, lamb, simple vegetables, and the infamous fermented shark also form the typical Icelandic diet. However, the booming tourism industry has opened up Icelandic kitchens to a wide range of international cuisines. Iceland has a wide dining scene, ranging from cheap eats to fine dining at high-end restaurants.
The exact cost of eating out will depend on what establishments you visit and how often. Just so you have an idea of the costs you’ll likely encounter, a basic lunchtime meal in cheap restaurant costs €18.08 per person, while a three-course dinner for two in a mid-range restaurant costs about €94. Expect to pay €12 for a combo meal at a fast-food restaurant. Having a regular cappuccino in a café will cost you €4.01.
If you’re looking to have some fun on your night out, a ticket to the movies costs €11.50, while a ticket to the theatre will set you back €36.
The monthly cost of public transport
The public transportation system in Iceland is not as developed as it is in other countries with the same level of economic development. It’s, however, much more efficient and reliable in the capital region, and consists of buses and taxis. Reykjavík has an excellent bus system that offers regular services to and from its major towns and attractions.
A single journey will cost you about €3.40. If you plan on traveling regularly, then you might save on transportation by purchasing a monthly travel pass for about €89.
Alternatively, you can use taxis to get around the Reykjavík area and many of the larger towns. The basic tariff starts at €4.99 and can go up by €2.17 per km.
If you plan on exploring the country’s incredible sights or you’ll be living out of the city center, then owning a car may be a good idea. Preferably, a 4-wheel drive since it is best equipped to navigate the wide, rocky terrain in Iceland.
Cost of Living in Iceland Compared To UK
Both Iceland and the UK are home to the world’s most cosmopolitan cities, making them ideal for expatriation. With unique experiences that can’t be found elsewhere, both of these destinations are also a traveler’s dream. There are, however, many differences between the two. In addition to the significant difference in size and population, what is the cost of living in Iceland compared to the UK?
If you lived in Iceland instead of the UK, your monthly living expenses would be 26% more expensive than in the UK. To help break this down even further, let’s take a look at the cost of specific household expenses.
Housing costs 36% more in Iceland than in the United Kingdom. For instance, a one-bedroom apartment in the city center goes for €1,355/month in Iceland as opposed to €832/month in the UK. You’ll also pay about 75% more for food, 62% more for clothing, 48% more for entertainment, 11% more for personal care, and 25% more for transportation.
On the other hand, buying property and childcare is cheaper in Iceland than in the UK. Also, as mentioned earlier, Iceland harnesses a lot of clean energy, which is why utilities cost over 90% less here compared to the UK.
Average Rent in Reykjavik
Rental costs in Reykjavik are rising at a higher percentage than even real estate prices. This is mainly due to the tourism boom experienced in recent years. Apartments that were previously rented out for long-term use are now being converted into Airbnbs. Landlords are looking to maximize the time they have for renting out their property. Since they can typically extract higher rents from visitors than from locals, residents are left competing for the limited available properties. Needless to say, this raises rental prices. So what is the average rent in Reykjavik?
For starters, renting a one-bedroom apartment in the city center will set you back about 1,462 EUR per month, while the same in the suburbs costs €1,215/month. For families that want a bigger house, renting a three-bedroom apartment costs about €1,800-2,900 in the city center and €1,500-2,400 in the suburbs. These figures are higher than in any other Nordic capital.
Houses for Sale in Iceland
After almost a decade of skyrocketing house prices, the real estate market in Iceland is beginning to slow down. And, although real estate prices are still high, monthly mortgage payments are more affordable than rental prices. But before you make such a huge financial commitment, it’s important to understand the real estate market in Iceland.
House prices vary wildly between different regions. Buying a house in the capital, Reykjavik, will obviously cost you more than Iceland’s smaller towns. It goes further to cost more in the city center than on the city’s outskirts. The most expensive town in which you can buy a house in Reykjavik is Egilsstaðir while the cheapest parts of the city are Mosfellsbær and Hafnarfjördur. The cheapest area to purchase property in the country is the sparsely populated Westfjords.
With that being said, the average cost of buying a house in Iceland is €4,250/square meter in prime areas and €3,205 in remote areas. Houses for sale in Iceland are often listed online on property websites, in newspaper publications, and print newspapers.
Should I Move To Iceland?
Still unsure whether moving to Iceland is the right thing for you? Well, here’s a look at why it has become of recent interest to prospective expats, including business people, those who seek employment, retirees, and even students looking to pursue their bachelors and masters degrees:
Iceland, like most countries, was greatly affected by the great recession. However, its economy has since gotten better thanks to the increasing number of tourists visiting the country and the influx of cash they bring with them.
While there may be some slight gender pay gap, Iceland aims for gender equality and fair treatment for all. There are more women in high positions than men, which shows they value equality. This makes it a great place to seek employment.
There have been minimal reports of discrimination in Iceland compared to other countries. There’s freedom of religion, respect for every culture, and it scored very well in terms of LGBT rights.
Many Jobs Available
Iceland has many job opportunities for locals and foreigners alike. The tourism industry is one of the most popular job sectors in this country. There are also skills shortage in the construction, IT, and healthcare sectors.
Iceland is just so beautiful. With various breath-taking islands, waterfalls, erupting geyser, glaciers, geothermal pools, fjords, and several other natural attractions, living in Iceland is like stepping into a storybook.
How Much Would a Trip to Iceland Cost?
Iceland is one of the best travel destinations in the world. The only problem is that it’s not a budget destination given the high living costs discussed above. So, how much would a trip to Iceland cost?
You’ll need at least €158/person to holiday in Iceland. Here’s a breakdown of the major expenses on an Iceland trip so you can see where to splurge or skimp, depending on your budget:
Airbnb is the first good option for accommodation, starting at around €60/night. If you’re traveling alone, get a cheap dorm bed in a hostel for at least €32/night. Both of these options usually offer self-catering services, allowing you to prepare your meals so you can save even further. Alternatively, you can hire a campervan for about €100/day. This gives you a place to sleep and takes care of transportation.
Public transport isn’t as efficient in Iceland as it is in the majority of other European countries. It’s much more effective in the capital where a one-way ticket costs about €3.40. Renting a campervan (as mentioned above) or a car is a more reliable way of getting around. The cost of renting an average car is about €60/day.
You can spend no more than €25/day per person if you’re cooking your meals. However, if you choose to eat out, one basic meal in a cheap restaurant can set you back €20.
How much you spend on leisure and entertainment is an entirely personal experience. You can splurge over €2700 on a private helicopter tour or look for free things to do Iceland such as visiting natural landmarks, taking a free hike, and so on.
Just as it’s possible to spend your entire life savings on a trip to Iceland, you can also spend the bare minimum amount needed to survive. If you’re looking for the best adventure that can be found in this land, you’ll have to dig deeper into your pocket.