The picturesque village of Vík í Mýrdal, located on Iceland’s southern coast, has rapidly become one of the country’s most visited destinations. With its iconic black sand beaches, dramatic Reynisdrangar sea stacks, and proximity to glaciers, waterfalls, and volcanoes, Vík attracts thousands of tourists every year. As tourism continues to grow, many investors are wondering: is Vík a smart place to invest in an Airbnb rental property in 2025?
Tourism Boom in Vík
Since 2010, Iceland has seen an unprecedented surge in tourism. In 2024, over 2.3 million visitors arrived in the country — a significant number of whom include Vík on their South Coast itineraries. With its stunning natural beauty and location along the famous “Ring Road,” Vík serves as both a destination and a base for exploring surrounding landmarks like Skógafoss waterfall, Dyrhólaey cliffs, and the Mýrdalsjökull glacier.
Iceland’s government continues to invest in rural tourism infrastructure in 2025, supporting small towns like Vík in accommodating ever-growing numbers of tourists. This ensures steady demand for accommodations throughout the year.
Vík’s Real Estate Market in 2025
Vík’s property market differs significantly from Iceland’s urban centers. The area is characterized by private houses, cottages, and a handful of small hotels or guesthouses. In 2025, a typical two- or three-bedroom house in Vík sells for approximately €280,000–€350,000, depending on location and amenities. Plots for development are available, though zoning laws and environmental protection regulations can restrict new construction.
The hotel inventory in Vík is limited, especially during peak seasons, which opens up strong opportunities for short-term rentals. Airbnb has become a vital supplement to the town’s hospitality sector, particularly from June to August and again during the northern lights season from October to March.
Airbnb Revenue Potential in Vík
Airbnb properties in Vík in 2025 offer consistent and attractive returns. According to local property managers, well-maintained listings often achieve occupancy rates of 85–95% in the summer and around 50–65% in the winter.
Average nightly rates for a two-bedroom home with good views or close to tourist attractions range from €180 to €250. With around 20 booked nights per month, a property can generate €3,600–€5,000 in monthly revenue. This equates to an annual gross income of €45,000–€55,000.
After expenses like cleaning, maintenance, insurance, management, and taxes, net income typically ranges from €20,000 to €30,000 annually. This puts the return on investment (ROI) between 8–12% per year — an impressive figure, especially in rural Iceland.
Regulatory and Tax Considerations
Since 2017, Iceland has tightened its regulations around short-term rentals. Hosts who rent out their property for more than 90 days per year must obtain a commercial license. Below that threshold, homeowners can rent without registration.
In rural areas like Vík, local municipalities are generally more supportive and flexible, recognizing the positive impact of tourism on the local economy. Thus, obtaining a license is more accessible compared to urban centers like Reykjavík.
Rental income is taxed at a rate of approximately 20–25%, depending on ownership structure. VAT may also apply if services like breakfast or cleaning are provided. However, deductible business expenses can offset part of the tax burden, particularly if the property is registered as a business.
Advantages of Investing in Vík
1. High Tourism Demand:
Vík remains one of the most visited locations in Iceland’s South Coast itinerary, ensuring year-round guest traffic.
2. Limited Supply:
With few hotels and a cap on new construction, competition is relatively low, increasing the viability of Airbnb offerings.
3. Easy Management:
Most hosts use automated check-in systems and hire local cleaning companies, making property management feasible even from abroad.
4. Strong ROI Potential:
The balance between property price and rental income allows for a relatively short payback period of 8–10 years.
5. Dual Use Potential:
Owners can block dates for personal use and rent the property during peak seasons, enjoying both lifestyle and investment benefits.
Risks and Challenges
1. Tourism Dependence:
Iceland’s market is highly reliant on international tourism. Natural disasters (like volcanic eruptions) or global travel disruptions could impact rental demand.
2. Currency Volatility:
As income is in ISK and many investors operate in EUR or USD, exchange rate fluctuations may affect returns.
3. Regulatory Changes:
Though Vík is currently Airbnb-friendly, stricter future legislation could introduce limits or licensing difficulties.
4. Remote Location:
Vík is around 2.5 hours from Reykjavík. Emergency maintenance and supply runs can be challenging without a local network.
Alternative Markets vs. Vík
Compared to Reykjavík — where the market is saturated with Airbnb listings and subject to tighter regulations — Vík offers a healthier balance of demand and supply. Its unique appeal, proximity to natural landmarks, and tight real estate inventory set it apart from other Icelandic towns like Höfn or Kirkjubæjarklaustur.
Cottages with private access, mountain or ocean views, and separate entrances perform especially well on Airbnb in the region.
Conclusion
Airbnb investment in Vík in 2025 offers a rare combination of strong occupancy, high nightly rates, and relatively low acquisition costs — all in one of Iceland’s most iconic locations.
With prudent planning, attention to legal requirements, and reliable local partners, investors can expect stable cash flow and long-term asset appreciation.
Key considerations before investing:
- Choose a property with strong views or proximity to tourist landmarks.
- Ensure all licenses are obtained.
- Plan for remote management with cleaning and maintenance support.
- Monitor currency exchange and optimize for tax efficiency.
As tourism continues to grow and supply remains constrained, Vík stands out as one of Iceland’s most promising destinations for Airbnb investors in 2025.
