A recent analysis by Realkredit Danmark revealed that the average household income required for mortgage approval has decreased in 91 out of Denmark's 98 municipalities, based on the income needed to secure a mortgage for a standard 140-square-meter home.
These findings suggest that obtaining a mortgage may now be more accessible for many Danes, especially first-time buyers.
There are some important caveats, not least the significant differences in income requirements between the country's most affordable and most expensive locations. In Frederiksberg, the most expensive municipality, a household income of 2.36 million kroner per year is required for mortgage approval on a 140-square-meter home, compared to just 690,000 kroner in Vesthimmerland, the cheapest municipality.
So, is this a good time to buy a house in Denmark? And what factors should prospective homebuyers take into account?
READ MORE: MAP: How much do you need to earn in Denmark to buy a house?
Why timing the market is difficult
Although financial forecasts and real estate industry estimates look promising, timing the market is extremely difficult, Mira Lie Nielsen, a housing economist at Nykredit, a leading Danish financial services group, told The Local.
"I might give you a bit of a boring answer, but I'm going to do it anyway: The right time to buy a house is when you need a house, when you need a place to live," Nielsen said.
She emphasised that attempting to time the market perfectly is often futile.
"One thing that is sure, that the Danish housing market shows us, is that trying to time it, that is, trying to buy at the exact best time, is difficult, and sometimes even impossible.
"You end up risking sitting on your hands and waiting, even though you found your dream house and your family is ready to move. The last couple of years showed us that things don't always go as predicted," she said.
Better economic conditions compared to a year ago
Interest rates have a significant impact on the Danish housing market. Danes have high mortgages, and house prices in the country are high.
"We have more debt than many other countries, and even though it's secure, it's still more. So, interest rates mean a lot here. What has happened to many people in recent years, especially with rising interest rates and inflation, is that they have stopped buying new homes and are waiting."
However, Nielsen acknowledged that the current economic conditions are more favourable for prospective homebuyers than a year ago.
"Compared to maybe a year ago, it's true, we have significantly higher wages in Denmark, and the inflation rate is down to normal. Not long ago, real wages were eaten up by inflation.
"Now, what's also very important is that interest rates stabilised and have a tendency to fall a bit even more."
READ MORE: Has it become easier to step onto Denmark’s property ladder?
These factors may make it a more reasonable time to buy, especially for those who have the finances in order, she added.
"So, if you tick off all the boxes, if you're sitting and waiting, in a situation where you want a new place to live, have the finances for it, and you've found a suitable home, then now is a better time (to buy) than a year ago, that's the case."
Housing price developments in the rest of 2024
Looking ahead, Nielsen believes that housing prices in Denmark will continue to rise, driven by factors including increasing wages.
"So, there you have it – inflation is down, real income is growing, interest rates are down, and housing prices are expected to go up… We expect to see a rising price development during the rest of this year – and next year, because of wages increasing at a rapid pace."
She also pointed out that tax breaks on housing this year have contributed to higher prices.
READ ALSO: Why falling US inflation could mean lower interest on your Danish mortgage
The Nykredit housing economist warned that buying a house should be a long-term decision, not one made lightly based on short-term market predictions.
"Plan for the long term; there are a lot of costs associated with buying a house; it's not like buying stocks and selling them tomorrow.
"But if you have been waiting for a good time to buy, the time could be now if you need a new place to live," she said.
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