As Iceland feeds its tourist boom, will residents be pushed out?

Nearly six times as many travellers as residents visited the island last year

Downtown Reykjavik is buzzing with life despite the arrival of winter. In the old city centre, tourists in thermal jackets snap photos at every corner and tour buses make their way towards the otherworldly natural sites that attract millions of sightseers each year to this sparsely populated volcanic island.

After a dip during the pandemic, Iceland received an estimated 2.2 million visitors in 2023, and is expected to welcome up to 2.5 million in 2026. New hotels and restaurants dot the capital, knitwear and artisanal crafts makers are doing brisk business, and the streets are noticeably busier than they were a decade ago. 

The more tourists arrive, the more workers are needed, and the country’s population grew in 2022 by more than 3 per cent – the fastest uptick on record. Recent seismic activity close to the capital also sparked travel interest, as “volcano tourism” – which, under calmer circumstances, can include treks to active areas – has become increasingly popular. 

All this is good news for the economy, which latched onto the sector after the infamous collapse of the country’s banking system in 2008. But it also poses problems for the roughly 400,000 Icelanders, who are struggling with the challenges of living in a country predominately oriented around tourism. 

Far from the crowds in downtown Reykjavik, Mr Jon Ferdinand Estherarson, a 31-year-old Icelander, unpacked his things at an apartment that he and his wife finally secured after four stressful months of searching. “We were very anxious, because we didn’t know what we would get and everything we saw was either outrageously expensive or very small and inadequate,” he reflected.