The emergence of towns and villages

Skálholt – a religious and cultural centre

Skálholt became an episcopal see in 1056 and became the nation’s main settlement, an honour it shared with Bessastaðir. Reykjavík was granted trading rights in 1786, but it was the establishment of Iceland’s first limited company around 1750 which laid the foundations for the development of a town. After a large earthquake in Southern Iceland in 1784, the episcopal see and the Latin school in Skálholt were closed and moved to Reykjavík several years later.

The growth of other villages

In the Middle Ages, when Skálholt was Iceland’s main settlement, Eyrarbakki was its main port. However, a village did not began to develop in Eyrarbakki, or indeed elsewhere in Iceland, until the 19^th century. Eyrarbakki had its heyday from the mid-19^th century until the first few decades of the 20^th century. Eyrarbakki was one of the largest farms in Iceland and was in fact much bigger than Reykjavík, and for a time it appeared that it might become Iceland’s capital.

Around the same time, a village began to develop at Stokkseyri and soon afterwards at Vík í Mýrdal and Höfn í Hornafirði, and in mid-century Þorlákshöfn. Journalist Árni Óla called Þykkvabær a thousand year old country village and it is probably one of the oldest villages in the country. Vestmannaeyjar was granted trading rights at the same time as Reykjavík, 1786.