Denmark's economy has outperformed expectations so far in 2024, with growth accelerating faster than the government initially predicted.
In May, the Danish government revised its growth expectations upward, projecting a 2.7 percent increase in 2024, significantly higher than the 1.4 percent forecast just six months earlier.
EXPLAINED: Why Denmark's economy is looking in such good shape
This optimistic outlook extends into 2025 as well, with the growth rate expected to reach 1.8 percent, up from the previously predicted 1 percent.
Inflation has also cooled more rapidly than anticipated, and employment rates remained robust.
This combination of factors has led to what Stephanie Lose, Denmark's economy minister, has called a "soft landing" for the Danish economy.
However, with September and autumn rapidly approaching, the question on many minds is how these economic developments will impact the property market after the New Year.
The 2025 housing market outlook
The property market in Denmark has performed surprisingly well through some of the economic volatility in recent years, showing resilience amidst high inflation and interest rates, Jeppe Juul Borre, the chief economist at the Arbejdernes Landsbank, told The Local.
"We are cautious optimists when we have a look in 2025. The housing market in Denmark has shown resilience to high inflation and higher interest rates. The foundation (for this) is high employment, good savings for tougher times, and, in general, lower debt," Juul Borre said.
"So, even though a lower speed for the general economy should materialise in 2025, we expect to see a stable housing market. At the same time, lower interest rates will constitute a supporting hand," he added.
MAP: How much do you need to earn in Denmark to buy a house?
Søren Kristensen, vice president and chief economist at Sydbank, echoed his colleague's sentiments.
"We have a moderately positive outlook for 2025, with our base case predicting a 2 percent rise in prices compared to 2024," Kristensen told The Local.
"Key factors to watch will be mortgage rates, which we currently see as being on the higher side. However, we anticipate a slight decrease this year and into 2025, which should boost the housing market," he explained.
READ ALSO: Is now a good time to buy a house in Denmark?
He also noted that steady increases in real wages and low unemployment levels throughout this year and next will likely push housing prices higher.
When asked whether 2025 will be a better time than 2024 for prospective homebuyers, Kristensen was uncertain.
"It's hard to say. Right now, we're seeing some market weakness, with a relatively large and growing supply of houses for sale, making it a good time for buyers. However, if the economy and labour market remain strong, that could impact the market. So, buyers might benefit in some areas but face challenges in others," Sydbank's chief economist said.
What about the autumn and winter of this year?
Housing prices have been increasing in 2024, and they will continue to do so throughout the year, Juul Borre believes.
"Home prices have gone up this year. And we expect them to do so in the rest of 2024," he said, adding that the current market situation has several characteristics that could favour those who are in the market for a home – especially first-time buyers.
"The prices have gone up again, which is one of the negative sides for first-time buyers. But on the other hand, interest rates have gone down.
"And since first-time home buyers often have more debt, falling interest rates are a helping hand. At the same time, the supply is going up – and with more sales signs, first-time buyers have more to choose from," Arbejdernes Landsbank's chief economist said.
In an interview with The Local earlier this week, Mira Lie Nielsen, housing economist with Nykredit, shared similar views.
"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 wages are increasing rapidly," she said.
However, Nielsen's outlook for first-time buyers was more tempered than Borre's.
"Let's face it – it's tough for first-time buyers in the country, especially big cities. They need to be able to compromise. Primarily when it comes to size and location. If they can do that, they might find it easier to get on the property ladder in Denmark," she said.
The government's housing price forecast
The latest governmental forecast, published in May, predicts an average price rise of 3.2 percent in 2024 and 3 percent in 2025, a significant jump from the 1.2 percent increase projected back in December of 2023.
This revision was driven by a robust labour market, which has led to higher incomes and wage growth due to new collective agreements.
Additionally, the upward trend in housing prices is likely to be supported by the fact that Denmark's Nationalbank, the country's central bank, is expected to lower interest rates.
Comments