Colliers Copenhagen Property Market Report 2019

Investing in Denmark – Market Report 2019

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Heavy infrastructure investments The ongoing Copenhagen Metro expansion scheme is adding a circle line, ‘Cityringen’, and a line from Nordhavn (north harbour) to Sydhavnen (south harbour). Scheduled for commissioning in 2019 and 2023, respectively, these metro lines will improve urban infrastructure substantially, connecting these newly developed city districts with the rest of Copenhagen. Scheduled for commissioning in the second half of 2024, the new Copenhagen Light Rail along the Ring Road 3 corridor is believed to foster new urban growth areas, attracting long-term investments and influencing future settlement patterns. Triple-A rating Denmark is perceived as a safe-haven investment market thanks to strong framework conditions, reflected in Denmark’s AAA rating by S&P. Compared to other European coun- tries, Denmark offers highly attractive risk-adjusted returns and low volatility market rent levels. In addition, leveraged investors have the opportunity to boost effective yields due to low transaction and lending costs offered by the highly efficient Danish mortgage system. Sustained GDP growth Following significant GDP growth of 2-3% p.a. for the past three years, GDP growth slowed to 1% in 2018 according to recent estimates by Danske Bank. Consumer spending edged up slightly in 2018, driven by real wage growth and low infla- tion. In combination with increasing employment levels, these factors have improved house- hold budgets, potentially leaving room for an increase in spending. However, most Danish households continue to hold back, seemingly putting savings before additional spending. On the basis of high savings ratios it seems fair to assume that all precursors are in place for a future increase in consumer spending. Fierce competition for talent Employment levels continued to climb in 2018, driven mainly by strong job growth. The favourable employment trend has driven down the Danish unemployment rate to a record-low of 4.0%. Companies are finding it increasingly difficult to hire skilled and qualified staff, with a labour shortage therefore possibly threatening to dampen the economic upturn and exac- erbate wage pressure in several business sectors. Low interest rates and low inflation The DKK-EUR peg ties the interest rates determined by the Danish central bank, Danmarks Nationalbank, to those of the ECB. In view of Denmark’s large current account surplus and the strong demand for Danish government bonds, it is plausible that Danish interest rate levels will remain lower than those of the ECB for a significant length of time. The era of record-low interest rates is coming to an end, starting December 2018 when the ECB put a stop to the historical asset purchase programme initiated back in 2015. In the span of three years, the ECB has purchased bonds worth more than EUR 2.5 trillion.

Copenhagen residents highly educated

17% Long-cycle higher education 19% Bachelor/medium-cycle higher education 23% Vocational education 13% Upper secondary school 23% Basic school (9-10 grade) 5% Short-cycle higher education

Note: Highest level of education completed. Proportion of Copenhagen residents (rounded figures). Source: Statistics Denmark