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PROPERTY

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

The housing market in Denmark has started to change, after months of high prices and high demand. But is there ever a good time to buy? We speak to property experts for some advice.

Should you buy now if you're looking for a property in Denmark?
House and apartment prices are expected to fall but is this a good time to buy property in Denmark? File photo: Mathias Svold/Ritzau Scanpix

“During Covid the housing market went up and up, people had spare time and money from the government’s corona relief packages, so the housing market went up and the interest rates fell,” Mira Lie Nielsen, housing economist at Nykredit, told The Local.

“Then the gas prices started to rise and inflation rates started to follow and the war made people uncertain. But the housing market was doing fine, until we had rising interest rates, which came around March 2022. So when we hit July, we saw the first housing price drop, for both apartments and houses, falling mostly in the Copenhagen area,” Nielsen said.

According to Nielsen, from July to August, house prices fell by 0.4 percent, apartment prices fell by 0.9 percent and Copenhagen apartment prices fell by 2 percent.

“This is a normal cycle – when interest rates rise and the number of properties for sale come down,” she said.

However there has been a “visible slowdown” in the number of properties for sale, with sales in Denmark at a level last seen in 2014 for houses and 2012 for apartments, according to Nielsen.

How much further will property prices fall?

Over the next 18 months, Nielsen expects there to be a 7-10 percent drop in house prices in Denmark, perhaps 15-16 percent in Copenhagen and a 10-12 percent drop in apartment prices with an even higher price drop for Copenhagen apartments. 

“Remember property prices in Copenhagen rose 30 percent during Covid and even before then they were high, so it’s not such a shock,” Nielsen added.

To buy or not to buy?

“We always recommend you buy a property based on when your family needs it, rather than an expectation of the housing market. If you want to speculate with your money, do it on other markets rather than the housing market,” Lise Nytoft Bergmann, real estate economist and senior analyst with bank Nordea told The Local.

“We expect housing prices will go down, so if you’re worried about the value decreasing and you have a nice place to live already, then maybe it’s a good time to wait a little bit. But we don’t really recommend that you do this kind of speculation because we’ve been surprised before, such as at the beginning of the pandemic and the beginning of 2020 when many economists in Denmark believed property prices would go down and we saw opposite of that. So it can be a dangerous strategy,” Bergmann said.

Why are property prices falling?

According to Lise Nytoft Bergmann from Nordea, reasons include interest rates going up and the current high inflation rate, which puts pressure on the buyer’s economy.

Another reason for the apartment market falling in price is new property tax rules (boligskatteregler) which take effect in Denmark in 2024.

From 2024 onwards, two property taxes – ejendomsværdiskattesatser and grundskyld – will be calculated based on appraisals of the property and land value. 

Apartments are more likely to get tax increases under the new rules because the land under them has been undervalued for a long time. So a new valuation will increase the housing tax.

Existing home owners get a tax subsidy for this but new buyers will have to pay the higher housing tax rate. As prospective buyers know this is coming into effect in 2024, it could be a reason why apartment prices are already starting to fall and will continue to do so, Bergmann said.

Worth the costs of buying?

“We expect property prices to be lower in the future and there are costs connected to buying and selling a home in Denmark so it depends on expectations and what your alternative is, for example if it’s easy to find a property you can rent that you like in the area you want,” Bergmann said.

According to Bergmann, the extra costs involved in buying are around 4-5 percent of the property price. These costs include a registration fee which must be paid to the state of 1,750 kroner plus 0.6 percent of the purchasing price; and registration of the mortgage deed (pantebrev) of 1,730 kroner plus 1.45 percent of the purchase price. Banks and mortgage lenders must usually also be paid for their work related to the purchase.

The extra costs for selling are around 3-4 percent of the property price.

Mira Lie Nielsen, housing economist at Nykredit reiterates that moving house is a huge decision, financially and personally.  “Copenhagen prices are still very expensive and you have high financial costs from a loan. If you are happy where you are and can wait, it could be worth seeing what happens with the market and interest rates but if it’s right for your family to move now then it shouldn’t stop you,” she said.

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ECONOMY

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.

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