Copenhagen’s property prices shot up by 14.4%, to DKK25,625 (USD4,663) per square metre (sq. m.) in 2013 (13.65% inflation adjusted).
Denmark experienced a long house-price boom dating from 1994, which reached a crescendo from 2003 to 2007, then declined after the financial crisis.
Pre-crisis prices will be reached in six months if the trend continues, according to Denmark’s biggest lender, Danske Bank. Detached/terraced houses in Copenhagen are now only around 10% less expensive than its peak value in late 2006 at DKK28,321 (USD 5,174) per sq. m..
Nation-wide, the average price of owner-occupied flats rose by 6% in 2013, to DKK19,297 (USD3,512) per sq. m. (5.25% inflation-adjusted). Holiday home prices rose 1.39% to DKK13,962 (USD2,541) per sq. m..
Houses fared less well. The price of houses in Denmark fell 0.5% to DKK10,894 (USD1,983) per sq. m. during 2013 (-1.15% inflation adjusted), according to the Association of Danish Mortgage Banks (ADMB).
- In the capital region, the average detached/terraced houses price rose 3.4%, to DKK18,619 (USD3,388) per sq. m. (2.8% inflation-adjusted)
- In Central Denmark region, house prices dropped by 0.8% to DKK10,226 (USD1,861) per sq. m. (-1.5% inflation-adjusted)
- In North Jutland, house prices fell 2.3% to DKK7,799 (USD1,419) per sq. m. (-3% inflation-adjusted)
- In Southern Denmark, house prices fell by 2.9% to DKK8,475 (USD1,542) per sq. m. (-3.5% inflation-adjusted)
- In Zealand region, house prices dropped by 4% to DKK9,011 (USD1,640) per sq. m. (-4.7% inflation-adjusted)
For houses, average days on market decreased to 208 in Q4 2013, down from 221 days in Q4 2012.
Holiday homes sold in an average of 309 days in Q4 2013, down from 319 in Q4 2012.
Owner-occupied flats sold in an average of 124 days in Q4 2013, down 20.5% y-o-y.
However the talk of bubble is difficult to credit, since gross rental yields are good, at from 5.18% to 6.24%.
Analysis of Denmark Residential Property Market »
The result is that rental yields on apartments in Copenhagen have hardly moved over the past two years. Apartments of 120 square metres (sq. m.) yield 4.84%. Apartments of 50 sq. m. yield 5.27%.
These are moderate yields.
Capital Gains: Capital gains from sale of immovable property in Denmark earned by nonresident owners are taxed at a special rate of 24%, because they do not pay any county income tax.
Inheritance: Inheritance of the immediate family (children, grandchildren, parents) is subject to total estate tax at a flat rate of 36.25%. No tax is levied on the spouse’s inheritance.
Residents: Income earned by residents is taxed at various progressive rates, up to around 55.60%. Tax on income consists of state tax, AM tax, municipal tax, and church tax.
Rent Control: There are five different forms of rent control in Denmark depending upon the age of the building and the system is very complex. However, rents on dwellings constructed after 1991 are exempt from rent control.
Legal Disputes: The system is confusing. “It is not possible for lay people to properly calculate the maximum rent applicable to a particular tenancy,’ notes the EUI report on Danish Landlord and Tenant law. “This is the cause of many legal disputes, which must be resolved by the judicial system.”
“Denmark is making the long hard pull to leave the crisis behind,” says Helge Pedersen, chief economist at Nordea Bank AB. “Domestic demand is on the move and international indicators suggest the most important export markets in Germany, Sweden and the U.K. have gained momentum.”
In 2008, Denmark became one of the first countries in Europe to go into recession. The economy contracted by 0.8% in 2008 and by 5.7% in 2009. Boosted by government spending and the recovery of the global economy, Denmark’s GDP grew by around 1.6% in 2010 and by another 1.1% in 2011. However, the economy contracted again by 0.5% in 2012, according to Statistics Denmark.
Prime Minister Helle Thorning-Schmidt has pledged to defend Denmark’s AAA credit rating by promoting stable finances while stimulating the economy within the European Union’s set budget deficit limit of 3%, according to a report by Bloomberg.
Unemployment low in Denmark
Denmark’s unemployment rate stood at 4.8% y-o-y in the last quarter of 2013, according to Statistics Denmark. Unemployment has been on a downward trend since the spring of 2012 and is projected to decline further.
In May 2014, inflation was just 0.5%, according to Statistics Denmark. From 2010 to 2012, the average annual inflation rate stood at 2.5%.