Denmark: Overview

RENTAL YIELDS

Poor yields are low at 4.5% in Copenhagen

A 120-sq. m apartment in Copenhagen generates a yield of 4.61% at a selling price of €4,620 per sq. m. At the average, yields in Denmark is not much higher at 4.63%.

Apartment prices in Copenhagen, and nearby suburbs, are among the more expensive in the world. These range from €180,00 to almost €1M, with an average of €4,664 per sq. m.

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TAXES AND COSTS

Taxes are generally high in Denmark

Rental Income: Buying through a company has tax advantages. In Denmark, corporate income is taxed at a flat rate of 28%. Business-related expenses, depreciation costs, and interest payments are deductible.

Capital Gains: Capital gains from sale of immovable property in Denmark are taxed at a rate of 28% for companies, while non-resident owners are taxed at a special rate of 32%, because they do not pay any county income tax.

Inheritance: Inheritance tax is imposed at a flat rate of 15% on the estate if the successor is immediate family (children, grandchildren, parents, grandparents), but no tax is levied on the spouse’s inheritance.

Residents: A resident is taxed on his worldwide income, levied marginally on an aggregate scale.

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BUYING GUIDE

Transaction costs are very low in Denmark

Roundtrip transaction costs in Denmark are among the lowest in Europe, at 1.3% to 3% of the property value. The greater part of the costs is accounted for by the real estate agent’s commission at 0.5% - 2%, usually paid by the seller.

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LANDLORD AND TENANT

Strongly pro-tenant laws in Denmark

Danish rental laws and practices are extremely pro-tenant.

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.”

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ECONOMIC GROWTH

Strong economy and wage growth

Denmark is the smallest and most southern of the Scandinavian countries with a population of 5.4 million. Its modern market economy generates high living standards with a GDP per capita of US$50,808 in 2006, one of the highest in the world. The country offers an interesting mix of lively cities and rural countryside.

Denmark joined the European Economic Community (now the EU) in 1973, however, it has decided not to adopt the euro. Even so, the Danish krone is pegged to the euro (€1 = DKK7.45092).

Denmark’s economy grew by an average of 3.3% per year from 1995 to 2000. Annual GDP growth slowed to 0.95% between 2001 and 2004 when exports were affected by the international recession. But GDP growth has now recovered to 3.4% in 2005 and 3.2% in 2006.

Real wage growth in 2006 was 3.4%, at par with the average growth rate of 3.3% per annum from 1995 to 2005. Real wages are expected to increase by 3.9% in 2007.

Unemployment rate was 3.9% in 2006, down from 9.6% in 1993, and is expected to fall further to 3.4% in 2007.