MR 2018

37

Copenhagen Property Market Report 2018

LOCATIONS Residential Read more

Growth and uncertainty in a buoyant market

VIDEO Location Nordhavn

Net migration turns negative as high prices affect demand patterns.

The Copenhagen residential market saw another year of surging prices on the back of a pronounced supply-demand imbalance, but the price level itself may just be a factor in limiting future growth as affordability concerns and increased regulation come into focus.

Supply and demand gap set to stabilise Historically, the Copenhagen market has been characterised by strong population growth and an undersupply of residential space, a mismatch that has been especially pronounced in recent years. With seemingly unbroken population growth and a construction sector operating near full capacity, the prospects of improving the supply/ demand imbalance have been bleak. Building on the budding signs seen in 2016, 2017 marked the year when abating population growth truly manifested itself in forecasting models. Changing demographics and population growth Nevertheless, the population forecast for Copenhagen remains impressive, exceeding the national average growth rate by more than 14 percentage points over a 20-year period. By 2040, Copenhagen is predicted to house some 155,000 new residents, corresponding to 22% population growth, driven mainly by young families and the elderly. This underlines two important demographic trends: An increasing number of young families are choosing to stay in Copenhagen instead of moving to the suburbs as was previously the norm. Similarly, but at the other end of the age spectrum, many old age pensioners also have a strong preference for central living, including access to public transport. Typically selling their single-family houses or villas in the suburbs to move to rental accommodation in central city districts, today’s elderly mostly enjoy good health and have a strong appetite for the city’s cultural offering. Nevertheless, demand has tapered off. In 2015, an influx of some 190,000 new residents was predicted within the next 20 years (i.e. 40,000 more than forecast today), and what is more interesting, the source of Copenhagen’s new residents has changed. Housing prices and migration patterns correlated While births and net immigration figures have seen a steady increase throughout the period, from 2006 to 2016 migration patterns show a clear correlation with housing prices: During times of increasing prices, net migration turns negative as inhabitants are

Central building rights becoming scarce, predicted to support rent increases in the prime segment longer term.

Prime-to-average rental gap has narrowed even more in 2017 but is showing signs of widening.

Core investment market dominated by international market players.