Focus report Copenhagen - Colliers Denmark 2024
RESIDENTIAL - COLLIERS FOCUS REPORT COPENHAGEN 2024
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erties. On this basis, we may expect to see rent increases in 2024 and probably in the next couple of years as well.
High homeowners' cost burden The owner-occupied property market took a surprising turn in 2023 as more buyers chose to ignore higher interest rates and generally increased ownership costs. In H2 2023, ownership property prices in Copenhagen and the surrounding municipalities increased, which can be attributed in part to the new property valuations and the new tax rules that came into effect in January 2024. It has been particularly attractive for buyers to purchase a new home before the end of the year to benefit from a tax rebate. The rising interest rates and home prices in recent years are creating dynamics that are favourable for the rental housing market. Many potential home buyers are finding it harder to get a foothold in the owner-oc cupied market in Copenhagen and the surrounding municipalities. The high prices of owner-occupied homes require a high down payment, but just as important is the burden of owner-occupied housing, which has increased significantly more than the burden of rental housing in recent years. After declines in both inflation and core inflation in H2 2023, there is broad consensus that interest rates will be cut in 2024. Although a decline in interest rates is good news for the owner-occupied cost burden in isolation, it could help maintain the current high prices of owner-oc cupied housing. This means that the historically high owner-occupied housing burden in Copenhagen and the surrounding municipalities is unlikely to move down to anywhere near the levels recorded before 2021.
The cocktail of rising financing and construction costs as well as investors' current expectations for yields and forward premiums has rendered it difficult for some developers to build profitably – especially in areas outside of Copenhagen – which puts a damper on new construction of private sector housing. The non-profit housing sector has also struggled to cope with rising construction costs, despite a fixed framework amount that is not set on market terms. In several cases, these have ended up exceeding the maximum amount for subsidised construction, which has caused a drop in the number of realised projects in the segment.
There is still a pipeline of projects for completion in the period 2024-2026, both in Copenhagen and Greater Copenhagen. However, compared to the highly active years of 2018-2022, the current pipeline includes a signif icantly lower volume of planned residential newbuilding, despite the fact that residential completions in 2018-2022 have been absorbed by the market. As a result, there are prospects for significantly lower construction activity in the coming years, which is generally good news for owners of existing residential rental properties in oper ation, as a slowdown in development activity is one of the factors driving demand for leases in existing prop Deteriorating conditions potentially spell fewer residential completions than pipeline suggests
Completions 2018-2022 1
Pipeline 2024-2026 2
Copenhagen
445,000
224,500
Greater Copenhagen, excl. Copenhagen
309,500
228,500
Note: 1 Annual average of residential completions, sq m. 2 Annual average of projected residential floorspace based on data from Byggefakta, sq m. Source: Byggefakta, Statistics Denmark, Colliers
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