Come in from the cold

With its glaciers, thermal springs, active volcanoes, lava fields and snow-capped mountains, Iceland is the land of fire and ice and is fast becoming one of the most popular city break destinations in Europe...

Just 302,000 people live on the England-sized island of Iceland, just south of the Arctic Circle and its capital, trendy Reykjavik, has become a mecca for the cool crowd.

Property prices have more than tripled over the last 15 years and when you add to that the lowest levels of pollution in the world, it's not hard to see why Iceland was named the most desirable country in which to live by the UN Human Development Index last year.

Home to two-thirds of Icelanders, Reykjavik is the world's most northerly capital and undoubtedly Iceland's property hotspot, although other cities, namely Akureyri, Kopavogur and Hafnarfjorour on the Coast, are popular too.

The capital's central pocket offers buzzing urban nightlife, albeit it at extortionate prices and its architecture is a muddle of futuristic glass buildings and rainbows of aluminium-clad houses.

Clinging to the steep incline leading up to the Hallgrimskirkja Cathedral, the once-neglected district of crumbling buildings in Reykjavik's fashionable 101 neighbourhood now boasts bijou pastel-hued town houses and designer boutiques.

Blur's Damon Albarn owns a house and a share in the Kaffibarinn bar in 101, and Iceland's biggest export, kooky singer Bjork, is a regular visitor.

Reykjavik rivals the greatest spa towns on earth, and the famous Blue Lagoon's steamy, mineral-rich waters - a short drive from the city across lava fields - are reputed to soothe body and mind. The geothermal springs also heat 90 per cent of all Icelandic homes.

The Golden Circle is a popular day trip, boasting the Thingvellir National Park, the ancient Viking parliament, and the magnificent waterfall of Gullfoss. Nature lovers should head to Olafsvik on the western peninsula to spot blue whales, and watch puffins breeding in the summer.

The property purchasing process in Iceland is relatively simple, with very low acquisition costs, but there are limitations on aspects of foreign property ownership imposed by the Agreement of the European Economic Area, which allows Iceland to participate in the internal market while not assuming the full responsibilities of EU membership.

Come 2015, when it is predicted that Iceland will join the EU, the limitations will Change. The state-run Housing Financing Fund offers loans of between 70 and 90 per cent of the price, and you can even withhold 10 per cent of your purchase price for six months in case any undisclosed defects emerge.

Iceland is not your typical holiday or second home location, but that is part of its appeal. While it has yet to register with foreign buyers on any real scale, the seeds have been sown and EU membership beckons.

The limitations on foreign ownership and a less established marketplace may cause headaches not associated with more conventional spots, but as more discover its eclectic charms, Iceland won't be left out in the cold for long.

Picture by Jennie.R.F