After a slow start to the year and a long period of declining prices in Denmark's housing market, the market slowdown is starting to lose some of its momentum.
Recent positive developments in the form of small price increases – such as the ones seen in April – are a testament to market activity picking up again.
This course of events has surprised real estate experts and disappointed a lot of prospective first-time buyers, who were hoping that a price decline – coupled with rising wages – could outweigh the added mortgage costs related to rising interest rates in the country.
What is the current state of the Danish property market?
Mira Lie Nielsen, the chief analyst at Nykredit – one of Denmark's leading financial services groups – told The Local that the current price levels are expected to remain mostly unchanged throughout the year.
"We had a couple of months with slight price increases. Since last summer, house prices dropped by 10 percent. However, a combination of high employment rates and wage increases – along with other factors – was enough to open up the market and get activity up and going again.
"We are not at 2021 and 2022 levels yet, but the market is getting back up again; now, overall prices are close to where they are going to be this year. So, we expect more or less an unchanged price level from here and throughout the rest of the year," Lie Nielsen said.
However, there are also major price differences among different parts of Denmark when it comes to pricing trends.
Price developments in Copenhagen
In the cheaper parts of the housing market, especially west of the Great Belt strait, the price drop is expected to be more resilient. On the other hand, in the more expensive parts of the capital area, prices have already started to pick up in a more robust manner.
"In Copenhagen, we've seen a couple of months of rising apartment prices. That came as a bit of a surprise, but we think that what is going on is connected to the tax reform - we see sales are up by a lot this year...
"If you buy in 2023, you will be able to have an apartment to live in with lower taxes for many years. Next year, the taxes will rise significantly, so what we see now is a spike in temporary demand and interest in buying property in Copenhagen," Nykredit's chief analyst told The Local.
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The first-time buyer's dilemma
But what do these developments mean for people who are yet to enter the housing market in Denmark - especially in the broader Copenhagen area?
"First-time buyers are not in a good position. The decline in prices that was close to 15 percent in Copenhagen – before the latest two months of small price increases – was not enough to outweigh the extra costs stemming from higher interest rates, so first-time buyers remain in a bad position.
"However, it needs to be said that many people in Denmark are starting to get high wage increases, and that has made me more optimistic about first-time buyers.
"Still, it's not an easy market in Copenhagen, as is the case with other capitals, where it can be challenging to buy an apartment or a house," Lie Nielsen said.
So, as things now stand, should first-time buyers hold off on their purchase until 2024, or should they try to find the home of their dreams right away?
"Hmm, that's a very difficult question. I'd say the situation for first-time buyers will be more or less the same. Of course, that depends on interest rates and salaries and how much higher taxes will affect prices.
"My advice is to buy today - if you can afford to buy and have found the right place. Because you never know, not even in the short term (next year), what can happen and whether inflation will be under control then. So, yes, if they have the option of doing so, I'd advise people to buy today," Nykredit's chief analyst said.
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