The Icelandic international has struggled to hold down a regular role since moving to White Hart Lane last summer, but Villas-Boas still considers him to be an important part of the senior set-up.
He said: "Obviously he's a player that means a lot to Reading.
"But he's a player that we rate very highly, we brought him here after his amazing contribution (on loan) for Swansea last year and he's a player we have high expectations for.
"Probably this season, at the moment, he is not going to the level he wants, but he's a player that we believe a lot in, and in his future here.
"We couldn't allow him to leave."