Colliers Market Report Denmark 2023

12

Colliers Market Report 2023

Lowest total return since before the financial crisis

30%

10% 15% 20% 25%

0% 5%

-10% -5%

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22

Total return

Income return

Capital growth

Note : Annual total return on commercial and investment property, Greater Copenhagen. Source : Colliers.

signs of market activity rebounding, but against a differ ent pricing backdrop than a year ago.

tion and demand that will invariably follow once the tide turns. When this will happen is of course hard to tell, and the path may be paved with numerous uncertainty fac tors and price declines, but not necessarily so. Rejected mark-to-market taxation good news for investments Traditionally, mainly foreign investors have considered the political system to be among Denmark’s strengths on account of substantial political stability and virtually no market interventions. In recent years, however, investors have revised their per ception, mainly due to the so-called Blackstone interven tion, aimed at “short-term property speculators”. In July 2020, an amendment of section 5(2) of the former Danish Housing Regulation Act made it harder to modernise apartments for the purpose of rent hikes. Then, plans of mark-to-market taxation were announced, imposing reg ular taxes on the value increment of major properties, and in 2022, a majority in the Danish Parliament voted to introduce a 2-year cap of 4% on annual residential rent adjustments.

Uncertain market offering opportunities The low activity level at year-start 2023 is widely believed to be a short-lived phenomenon, reflecting uncertainty in terms of pricing and where the market is headed as well as when it bottoms out. In addition, the limited activity gives rise to investment opportunities because the field of competing prospective buyers has narrowed. In our opinion, it is possible to make acquisitions on favourable terms, provided an investor has the stom ach to seize current opportunities and, appreciating the inherent risk, submits a bid more aligned with present sellside expectations. Such investments become feasible that would normally be rendered unfeasible in a more normal market where an investor would face intense competition from fellow prospective investors. In the current market, investments potentially impair short-term returns because financing poses a challenge and because pricing is subject to some uncertainty. Even though yield levels should not rebound in near future to the levels seen at year-start 2022, it will be possible for an investor to jump the queue in terms of the competi

Because of the 5(2) amendment, some foreign investors exited the market for old-stock residential properties