Hugely popular with Reykjavikers seeking an affordable spot for lunch who come for its fresh baked bread, home made soups, and its fantastic fish of the day (fish cakes on the day I went), Ostabúðin doesn't seem to be on the radar of the tourist guidebooks.
Ostabúðin’s little hidden secret is its cosy restaurant on the bottom floor, open during lunch hours, (from 11:30 to 14:30). The small space only has a couple of seats and usually fills up quickly every day, but as the service is fast you don't have to wait long.

www.ostabudin.is/
Skólavörðustígur 8, 101 Reykjavík,
+354 562 2772
Google map: bit.ly/Kf0VUX

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Just back from a visit at the end of October, after the kronor had crashed and this made things cheaper, though still about the same as the UK.

We loved a second hand bookshop off the main drag and just down from Cafe Rosenberg and near the old Cirkus club. It was piled high with books, with a fair few in English. It has a vibe of total happy chaos.

Our favourite cafe was the one on the corner of Laugeamur and the street where Cafe Rosenberg is - it's a yellow house. Very good coffee, cakes and atmosphere.

We ate at two very good places down at the harbour. One is called "The Baron" and is a fish market. The owner takes his leftover fish and makes the most delicious crayfish soup you can imagine. You sit on old barrels and
drink beer while sipping your soup from a cup which is very atmospheric. If you get fed up with fish just by it is a very good hamburger joint with terrific burgers and fries. Even cheaper is the hot dog stand round the corner from it selling Icelandic sausages in a roll. Very reasonable.

Best bargain for shopping were the Red Cross
charity shops on Laugeamur. I got a beautiful
Icelandic wool jumper there for about five pounds.

And do try the public thermal pools of the city. They are more "real" than the Blue Lagoon, which though fabulous, is rather touristy in feel.

Café Rosenberg, Lækjargata 2, 101 Reykjavík
The Baron, Geirsgata 101

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Sitting atop six huge hot water tanks on a hill in Reykjavik, Perlan (the Pearl) restaurant is one of the top eateries in Iceland, with prices that go with its reputation. One floor down, however, is the inexpensive cafe, where extended local families gather on the weekend to sip a beer and eat Italian ice cream. Surrounded by windows on all sides and with access to the viewing platform outside, this is a great place to take in all of Reykjavik and the mountains beyond. As the sun moves towards the horizon, the surrounding landscape becomes bathed in a wonderful golden light (weather permitting of course!)

Perlan - Öskjuhlid - 105 Reykjavik
www.perlan.is/index.php?option=com_content&task=view&id=27&Itemid=102
Tel: (+354) 562 0200

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