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PROPERTY

Will house prices in Denmark ever fall?

House prices in Denmark have increased consistently in recent years, making it harder for first time buyers to get on the property ladder. But a reversal in the trend can be expected by 2024, a bank said on Wednesday.

property in copenhagen
A Danish bank says inflation and interest could bring down house prices by the end of next year. File photo: Mathias Svold/Ritzau Scanpix

Increasing interest and inflation will cause house prices in Denmark to fall by the end of next year, Danish bank Handelsbanken said in a new prognosis published on Wednesday.

The bank predicts an overall fall in property prices of between 10 and 15 percent by the end of 2023, according to the analysis.

“And we would certainly not rule out such marked price drops in the most expensive areas like the apartment market in Copenhagen, which will also be impacted by a property tax reform that takes effect in 2024,” the bank’s senior economist Jes Asmussen wrote in the analysis.

High employment levels will help place the Danish economy in a strong position once it reaches more difficult times, according to the analysis.

The war in Ukraine has contributed to instability which has helped push inflation upwards to levels not seen since the early 1980s.

READ ALSO: Food and energy prices rocket as Danish inflation hits 40-year high

While the consumer price index in April was 6.7 percent higher than last year, Handelsbanken expects inflation for the year as a whole to be around 6.2 percent.

“And although it is expected to fall next year, we will probably have to get used to inflation being higher than we have been used to for many years,” Asmussen wrote.

High inflation and raised interest rates are a bad combination for home buyers who will see their buying potential diminished, the bank concludes.

But predictions of lower property prices in the future are subject to uncertainty because of the war in Ukraine and its potential to cause further inflation.

Asmussen nevertheless said it is not a question of whether house prices will fall, but when and by how much.

“We expect that the many headwinds for the housing market will lead to price drops for the country as a whole, and these will become clearer after the summer,” he said.

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PROPERTY

Denmark opposition wants tax deductions for first-time home buyers 

Denmark’s Liberal (Venstre) party, the largest opposition party, says it wants to make home ownership more affordable in Denmark. 

Denmark opposition wants tax deductions for first-time home buyers 

Under the proposal, first-time home buyers could be given tax deductions on savings set aside for buying a home, newspaper Berlingske reports.

Specifically, would-be homeowners could receive a 20 percent tax reduction on up to 50,000 kroner per year for five years, according to the Liberal plan, which the party is set to present on Monday.

As such, a couple which together saved 500,000 kroner over a five-year period would get a benefit of 100,000 kroner under the proposed tax deduction.

In addition to the tax plan, the Liberals want to spend 100 million kroner yearly building housing, with 122,000 new homes for buyers planned over the next ten years. Municipalities would be given incentives to build more homes with shorter processing times under the scheme.

The Liberals estimate that the savings scheme for first-time buyers would be used by around 50,000 people per year and therefore cost around 1 billion kroner annually.

READ MORE: Danish apartment sales cool to eight-year low  

A reform of job centres and municipal employment services, which the Liberals will also present in the near future, would help to save money which could be spent on the home ownership plan, party leader Jakob Ellemann-Jenses also said in the Berlingske interview.

The Liberals party count with the support of the Conservatives and the Danish People’s Party, although the former party is reported to favour broader tax cuts.

The Social Democratic government opposes the plan. Housing minister Christian Rabjerg Madsen told Berlingske that the proposal would push up house prices in larger cities, forcing people on normal incomes to move away from larger population centres.

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