Colliers Copenhagen Property Market Report 2019

Residential – Market Report 2019

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Tighter regulation of the ownership housing market In recent years, the Copenhagen market for ownership housing has been characterised by uptrending prices and shorter resale periods, supported not least by record-low inter- est rate levels allowing for inexpensive mortgage financing. On 1 January 2018, the new legislation on lending became effective, introduced as one of the measures to prevent a renewed housing market bubble. The new regime imposes stricter requirements on borrowers, limiting the choice of financing for Danish house- holds if they incur debts of more than four times their household incomes before tax. The restrictions include variable interest loans and loans with a minimum fixed-interest period of less than five years as well as interest-only loans. In 2017, our fellow Nordic countries, Sweden and Norway, introduced similar measures, which quickly impinged on ownership housing prices. In Stockholm, the average price of ownership housing continued to drop in all four quarters of 2017, in Oslo it dropped in the last three quarters of the year. In Copenhagen, however, the new legislation was slower to feed through to the market, but Q3 2018 saw a 2.5% decline in average realised selling prices, marking the first quarterly decline in Copenhagen ownership housing prices since Q1 2012. Between Q3 2017 and Q3 2018, average ownership housing prices rose by 2% in Copenhagen and 3% in the district of Frederiksberg, representing a sharp slowdown in the pace at which prices have rallied in previous years. New taxation basis the dark horse of the future housing market Already long ago, the Danish Government announced that a new public property valua- tion system was to be introduced. However, following repeated delays, the new system will not be introduced until 2021 according to most recent information. The Danish Government has already warned of an increase in Copenhagen land values, in several instances imposing higher property taxes on homeowners. The actual increase in property taxes remains unknown, leaving it open to specula- tion which effect it will have on the housing burden associated with ownership housing. However, higher property taxes will not affect existing homeowners as they are granted a tax discount, with the increase in land taxes becoming payable only when the dwelling is taken over by a new owner. According to several market observers, Copenhagen ownership housing prices will drop as the ownership burden increases. Many prospective homebuyers therefore currently wonder if it makes sense to acquire a new home before 2021, thereby achieving said tax discount, or await a possible post-2021 decline in prices due to the higher property taxes.

Prime market rent DKK 2,000 per sqm

Prime to average rental spread 15%

Source: Colliers International

So far, the resale periods of Copenhagen owner-occupied flats remain unchanged, on a par with the levels recorded in 2017.