Colliers Market Report Denmark 2023

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Residential - Colliers Market Report 2023

Residential assets still in demand After some years of exceptionally low interest rates, and negative bank deposit interest rates, interest rates saw a sharp increase in early 2022. This changed conditions in the property market where the particularly strong inves tor demand for residential properties drove down yield requirements to historical lows in recent years, matched by corresponding price hikes. However, faced with higher interest rates, some investors were no longer prepared to buy residential properties based on previous yield requirements. The rise in inter est rates has served to increase financing costs, made it more difficult to obtain the same LTVs as before and driven up alternative returns on e.g. bonds. Despite stricter financing requirements, residential assets continue to appeal to many investors, because residential properties generally offer stable cash flows, even during economic downturns. In consequence, res idential property remains an important portfolio compo nent, because it functions as a stabilising hedge against more cyclical assets. At the same time, residential assets, unlike e.g bonds, offer an element of inflation-hedging as rents usually track general prices (although the Danish Parliament has introduced a temporary cap on rent increases).