MR 2018

40

Copenhagen Property Market Report 2018

City of Copenhagen

the previously popular office-to-residential conversion trend in the CBD has tapered off, mainly because of an office occupational market recovery and rising construction prices.

The future source of supply is largely tied to the Nordhavn development site which significantly exceeds all privately owned sites. As By & Havn controls these building rights, the supply will gradually be released at a somewhat predictable pace. However, the total supply of building rights with residential planning in place is moderate and will, at the given construction activity, only accommodate six years’ of projected population growth. New areas that may contribute to future supply include Refshaleøen and part of Amager Common (Amager Fælled), although associated with a considerable element of uncertainty. We expect the longer-term shortage of central development sites to put an upwards pressure on prices in Copenhagen as supply opportunities become scarcer. The price strain may qualify industrial areas in the surrounding municipalities for residential redevelopment, mimicking the trend seen in the Valby and Vanløse districts. Favourable supply/demand dynamics support price hikes Supply/demand dynamics have proved to be a strong driver of price hikes in the housing market. Indeed, over a 5-year period, rental prices have risen by roughly 20% and 40%, respectively, for prime and secondary housing, while average ownership prices have increased by 70%. As we predicted in our 2017 market report, rental growth slowed to some 2.50% in 2017, well below the 3.75% CAGR seen in the last decade. The ownership market once again defied most predictions and soared to an unprecedented high. Ownership market remains healthy The Copenhagen ownership market has attracted considerable attention in the past year. From Q3 2016 to Q3 2017, average prices of owner-occupied flats in the City of Copenhagen and Frederiksberg increased by 12% and 9%, respectively. As prices have surged by 70% and 64% in Copenhagen and Frederiksberg since Q3 2012, various analysts and politicians have voiced concerns about a pending housing market bubble, which concerns may seem pertinent given the recent drop in residential prices in other Scandinavian capitals. In 2017, the spill-over demand from the Copenhagen market also boosted ownership prices in the surrounding municipalities. Most areas saw price rallies in the 10-15% range, driven by both asset appreciation and new construction activity. The latter has served to increase the quality of the housing stock and, by extension, the price level. Taking into account current migration patterns, we expect these markets to see further increases in the years ahead. Healthy market depth and liquidity despite steep growth figures Although the growth figures seem to indicate an overheating market, market depth and liquidity remain healthy. On a quarterly basis, the number of owner-occupier flats sold in Copenhagen and Frederiksberg averaged some 1,560 from Q3 2016 to Q3 2017, thereby exceeding the 5-year average by 6%, and resale periods were five days shorter.

Average price per sqm DKK 38,800

Average sales period 63 days

City of Frederiksberg

Average price per sqm DKK 43,500

Note: Average realised sales prices of owner-occupied flats and average resale periods in laydays, Q3 2017. Source: Association of Danish Mortgage Banks Average sales period 59 days