Colliers Market Report Denmark 2023

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Colliers Market Report 2023

Hotel I ndustrial & logistics Retail Residential Office

Danish framework conditions Danish framework conditions for running a business remain excellent by international standards. In TMF Group’s “Global Business Complexity Index 2022”, how ever, Denmark has dropped from its previous top ranking to third position. Nevertheless, Denmark is still believed to be one of the easiest countries in which to set up and run a business. Denmark still a safe haven? Before year-end 2022, a new broad Danish coalition gov ernment was formed. Although experience is scarce from previous left-right coalitions, it is believed to herald sta ble conditions, including for the property market, thereby strengthening Denmark’s position as a stable destination for foreign investments. Supported by strong fundamen tals and a healthy banking sector, Danish government bonds have for years been assigned AAA top ratings by Fitch, Moody’s, and Standard & Poor’s. Favourable framework conditions, a stable political sys tem and a robust economy ensure that many interna tional investors continue to perceive Denmark as a safe haven for investments.

In addition, high inflation has triggered sharp rate hikes of 50 bps or more by leading central banks. Most recently (December 2022), the Fed raised the target range for the federal funds rate by 50 bps, meaning that the bench mark rate had been raised by more than 4 ppts in the span of nine months, and to a level not seen since 2007. Further rate hikes are anticipated. Rising US interest rates affect the Danish market as international inves tors may possibly discard Danish mortgage bonds for US equivalents. Asian investors have been particularly active in the Danish market for mortgage bonds in recent years. It remains to be seen whether these investors will exit the Danish market. Although in 2021 maintaining that the rise in inflation was a short-lived phenomenon that was not expected to trig ger any rate hikes, the ECB has now also changed its tune, in 2022 introducing substantial rate hikes for the first time in 11 years. In December 2022, the ECB raised the rate of interest by 50 bps to 2.5%. These rate hikes prompted Danmarks Nationalbank to raise the rate of interest on four occasions in 2022, most recently in December 2022 by 50 bps. The policy consensus of leading central banks is to continue rate hikes in 2023 to rein in inflation.

Inflation sky-high in 2022, but expected to stabilise at lower level at end-2023

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Note: Consumer price index, average annual growth (y/y) in the prices of goods and services. Source: Statistics Denmark, Danske Bank, Colliers

Christoffer Mortensen Associate | Valuation & Advisory christoffer.mortensen@colliers.com