Colliers Copenhagen Property Market Report 2019

Residential – Market Report 2019

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Demand continues to outstrip supply Over the past decade, solid population growth and limited newbuilding have exacer- bated the supply and demand imbalance in the Copenhagen housing market. Although new construction activity has picked up in recent years and is expected to continue at a brisk pace, the imbalance still remains, with the historical housing shortage creating a so-called catch-up effect, that is, any annual oversupply is quickly absorbed. However, it is uncertain how this will affect price movements as recent years’ strong price rallies in the markets for both rental and ownership housing have been driven by exactly the scale of this undersupply. As a result, it cannot be ruled out that the added new supply, even if not matching the accumulated increase in demand, may in fact curb future price hikes and even cause a slight decline in prices in certain locations. New development areas to meet future housing demand Several prominent Copenhagen development areas are nearing full completion. However, development opportunities are still available in a number of brown-field districts, including Nordhavn and Refshaleøen. When a brand-new island off Refshaleøen, Lynetteholmen, is completed, it is expected to provide housing for some 35,000 residents. Full completion is not expected until 2070, however. Redevelopment activity remains brisk in the Carlsberg City District, Valby Maskinfabrik and Grønttorvet, with several residential completions in recent years and a pipeline of more than 350,000 sqm to be developed over the coming years. Assuming that population growth remains strong, translating into a demand for some 450,000 sqm additional housing a year, the total volume of remaining residential building rights (discounting Refshaleøen and Lynetteholmen) could be absorbed within a 7-year period if developed. Stagnant rent levels in beleaguered rental market In 2018, prime rents of new residential units levelled off due to a substantial added supply of new units and general affordability constraints among common Copenhagen house- holds. Since 2010, rents had surged for prime new-stock housing, increasing by 38% on average, driven by a substantial shortage of units. However, rents have now reached a level where common household budgets do not allow for further increases. Unlike the Copenhagen market for prime rental housing, more secondary locations have seen an increase in rent levels as tighter loan requirements in particular have caused a shift in demand from ownership to rental housing. In terms of demand dynamics, the secondary market differs from the prime market as the need for housing tops the need for flexibility. Secondary rents are expected to stagnate longer term as they are closing the gap to prime rent levels.

CITY OF COPENHAGEN

Average price per sqm DKK 39,900

Average sales period 71 days

CITY OF FREDERIKSBERG

Average price per sqm DKK 44,700

Average sales period 66 days

Note: Average realised sales prices of owner-occupied flats and average resale periods in laydays, Q3 2018.

Source: Association of Danish Mortgage Banks