Colliers Denmark Market Report 2024

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RESIDENTIAL - COLLIERS MARKET REPORT 2024

Gammel Jernbanevej 27-31, Valby

Rental housing gaining ground For a long time, we have seen a general trend of more Danes preferring rental housing. Over the past ten years, the number of rental homes has overtaken the number of owner-occupied homes.

This is partly because rising prices for owner-occupied homes have made it harder for young people to enter the owner-occupied market, while it has been attractive for older people to sell their home and collect a tax-free capital gain and then move into a rental property. In 2019-2021, prices for owner-occupied housing increased across the country due to the previously described corona effect. The prices increased the so-called housing burden for owner-occupied housing, i.e. how much of the household income must be spent on mortgages and other expenses of being a homeowner. The threshold of 40% of disposable income is set to correspond to Eurostat and OECD’s defini tion of how much of the household’s disposable income is considered acceptable to spend on housing costs. In 2022, interest rates rose, further increasing the housing burden. Contrary to expectations, rising interest rates have not lowered housing prices significantly, especially in major towns and cities. In Copenhagen, the rental housing burden has increased slightly since 2021, mainly because rent levels have risen due to increased demand and limited new construction. Conversely, high wage increases in the same period have slowed the increase in the rental housing burden. In con trast, some Jutland towns and cities, including Aarhus and

Horsens, have seen a significant increase in supply, which has limited rent increases and triggered some vacancy in certain properties in specific locations. In major towns and cities, the owner-occupied housing bur den has grown by an average of 24.6% since 2021, while the rental housing burden has only increased by 1.5% in the same period. This means that the average difference in the housing burden for rental and owner-occupied housing in metropolises has increased from 13.2% in 2021to 24.5% in 2023. At the end of 2023, the market for owner-occupied housing was strong despite higher interest rates and uncer tainty about new property valuations and therefore future property taxes. Inflation and core inflation have been downtrending in H2 2023, which is why economists now expect interest rate cuts in 2024. There is still uncertainty about whether a recession could occur in 2024, but the fear of a severe recession is less pronounced than in 2023. However, we believe that a strong labour market will continue to support the housing market, as many households’ finances are fairly well-cush ioned due to low unemployment and tighter loan require ments (due to FSA regulations and bank lending prac tices). Many potential homebuyers are finding it harder to get a foothold in the housing market – partly due to the increased housing burden for owner-occupied homes, and