House prices in Denmark fall as more properties put on market

The Danish housing market has seen a changing trend during the summer with the price of both houses and apartments falling.

House prices in Denmark fall as more properties put on market
Mægler fra Nybolig sætter "Til salg"-skilt op ved bolig i Odsherred den 29. juni 2021

July saw the first average decreases in the prices of both houses and apartments for several months.

The price of houses fell by 1 percent, whole privately-owned apartments on the market fell in price by 1.5 percent, new data from real estate site Boligsiden show.

The number of apartments on the market has increased by 7.2 percent, meanwhile. For houses, there was a 3.8 percent increase to the number of properties available.

The numbers observed by estate agents in July indicate a new reality on the housing market, according to housing economist Mira Lie Nielsen of Nykredit.

Nielsen told news wire Ritzau that “buyers now have a better set of cards in their hands.”

“The supply has become bigger. Now prices are also starting to give way. Sellers can certainly feel this,” she said.

“Prices have begun to give way to the pressure from increasing interest, higher inflation and the economic uncertainty that has built up,” Nielsen said.

That assessment was echoed by Arbejdernes Landsbank senior economist Jeppe Buul Borre.

“We are seeing a housing supply that has grown. Earlier in the year, the supply was at its lowest for around a decade and a half. But it’s begun to increase during the spring and summer,” he said to Ritzau.

“On the other hand, it has become more expensive to buy and live in a home. That also means that this demand for housing, which has been extremely high for the last couple of years, is not what it once was,” he said.

The trend must continue for several months before any certain conclusions can be drawn, he also noted, but added nevertheless that the drop seen in July was “probably the start of a further fall” in prices.

“We are looking ahead to a market where heating of housing has become more expensive. Interest rates have also gone up, so when you need to finance the purchase of a property, that has also become more expensive,” he said.

Regional differences in the current trend were meanwhile pointed out by Nielsen, who said that the Greater Copenhagen region had seen a larger increase in the number of properties on the market than other parts of Denmark.

“The marked slowing down of the property market can be seen at the moment in the market for private apartments, where the number of transactions has fallen markedly,” she said.

READ ALSO: EXPLAINED: Denmark’s new property tax rules from 2024

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Danish central bank says house prices will fall and inflation continue in 2023

Denmark’s central bank Nationalbanken predicts a decline in house prices in 2023 and 2024 in a new economic forecast.

Danish central bank says house prices will fall and inflation continue in 2023

The prediction on house prices is included in the National Bank’s latest review of the Danish economy’s prospects.

According to the central bank, house prices will fall by an average of 5.6 percent in 2023. They will continue to fall in 2024, dropping by 1.8 percent.

The latest prognosis represents a departure from the previous forecast issued by the national bank in March, in which it said it expected house prices to increase by 1.7 percent next year and by 2.1 percent in 2024.

READ ALSO: Should you buy now if you’re looking for a property in Denmark?

The economy is expected to have a tough year in 2023, according to the Nationalbanken forecast.

Inflation will be 4.3 percent, the central bank says, meaning another year of stinging price increases, albeit at a lower level of inflation than the 8.6 percent expected for the whole of 2022.

In 2024, inflation will return to a lower level of 1.7 percent.

Although GDP is predicted to be up by 2 percent at the end of this year, it will drop by 0.1 percent in 2023 before a 1.2 percent increase in 2024.

GDP predictions are also more pessimistic than they were in the March forecast, which expected a 2.1 growth in 2023.

“We can prepare ourselves for a period with weakened [economic] activity and a fall in employment,” the director of the National Bank, Lars Rohde, said in statements accompanying the release of the forecast.

“But it should be kept in mind that this is happening [in Denmark] at a conjuncture following the coronavirus pandemic, which caused a very pressed labour market,” he said.

“It is important to bring down the high inflation. That will require a significant tightening of financial policies and that will unfortunately be felt by everyone – companies and individuals,” he said.

“If we don’t get inflation under control, the costs for society will just get even bigger,” he said to DR.

EXPLAINED: What’s causing the highest inflation rate in Denmark for almost 40 years?

Projected high energy prices this winter are among causes for the expected continuation of inflation next year. Interest rates have also been pushed up.

Unemployment is predicted to increase slightly but will remain at a comparatively low level of 89,000 next year, Nationalbanken said.

Denmark’s unemployment rate is lower than in most other European countries, resulting in a labour shortage.

“The combination of great strain in the labour market, high demand and high inflation create the risk of a self-fulfilling wage-price spiral in Denmark. We therefore believe that fiscal policy must be tightened as soon as possible to significantly bring down demand. This should be by more than what the government proposes in the draft budget,” Rohde told DR.