The average price of owner-occupied flats in Denmark fell by 0.54% (-1.7% in real terms) q-o-q to Q2 2011, the fourth consecutive quarterly house price fall recorded by the Association of Danish Mortgage Banks (ADMB). During the year to end-Q2 2011, house prices dropped by 3.2% (-6.1% in real terms) to DKK11,689 (€1,571) per square meter (sq. m).
Total sales of one-family houses plunged 21% to 7,488 units in Q2 2011 from the same quarter last year.
During the country’s housing boom (from Q1 2004 to Q3 2007), property prices rose by 58% (49% in real terms), according to the ADMB. Then, from Q3 2007 to Q1 2010, property prices in Denmark dropped by about 15% (-19% in real terms) due to the global financial meltdown.
The housing market is expected to remain depressed over the next two years. Property prices are projected to fall by about 10% by 2013, according to the Copenhagen-based Economic Council.
Denmark’s central bank, Danmarks Nationalbank, slashed its key lending rate by 35 basis points to 1.2% in early-November 2011, in line with the ECB’s move to cut its key rate by 25 basis points to 1.25%. The country’s central bank usually follows the moves of the ECB to keep its currency (the Danish Krone) stable. The Danish Krone was pegged to the euro at €1=DKK7.46038 with a 2.25% band.GDP growth is expected to slow to 1.1% in 2011, as the outlook for the country’s banking sector remains negative. About 120 Danish banks have been cut off from funding markets, squeezing credit and stalling growth. The Danish government plans to inject about DKK17.5 billion (€2.35 billion) into the market in an effort to boost the economy.
In 2010, the economy grew by 1.7% after contracting by 5.2% in 2009 and 1.1% in 2008.
Analysis of Denmark Residential Property Market »
Buying a small apartment in the centre of Copenhagen is now becoming quite an attractive proposition for a landlord. It is a pity, therefore, that foreigners cannot buy!
Capital Gains: Capital gains from sale of immovable property in Denmark are taxed at a rate of 28% for companies, while nonresident 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.
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 the smallest and most southern of the Scandinavian countries with a population of 5.5 million. Its modern market economy generates high living standards with a GDP per capita of US$55,513 in 2010, 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 at €1=DKK7.46038 with a 2.25% band.
In 2008, Denmark became one of the first countries in Europe to formally go into recession. The economy contracted by 1.14% in 2008 and by 5.2% in 2009. Boosted by government spending and the recovery of the global economy, Denmark’s GDP grew by around 1.7% in 2010. In 2011, economic growth is expected to slow to 1.1%, mainly due to the country’s banking crisis, which was exacerbated by a ballooning budget deficit, high unemployment and struggling housing market.
Since the collapse of Amagerbanken A/S in February, about 120 Danish banks have been cut off from funding markets, squeezing credit and stalling growth. According to the report by Standard & Poor’s published in July 2011, as many as 15 Danish banks are expected to fail before the country’s banking crisis is over.
In an effort to boost the economy, the Danish government plans to inject about DKK17.5 billion (€2.35 billion) into the market in the coming months.
The budget deficit is projected at 3.8% of GDP in 2011. In 2012, the budget deficit is expected to grow at 5.1% of GDP.
At the height of the global crisis, the fiscal stimulus combined with bank bailouts pushed the budget deficit from a surplus of 3.4% of GDP in 2008 to a deficit of 2.7% of GDP in 2009 and 5.5% in 2010.
Denmark’s unemployment remains one of the lowest in EU at 4.2% at end-2010. However, that was sharply up from 1.9% in 2008. In September 2011, the seasonally-adjusted unemployment rate was 4.2%, according to Statistics Denmark.
In October 2011, consumer prices rose by 2.8% from the previous year, up from 2.5% seen in September 2011, based on figures released by Statistics Denmark.
Inflation is expected to rise to 3.2% by end-2011 from 2.3% in 2010 and 1.3% in 2009, according to the IMF.
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