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Last Updated: Jun 27, 2014




House prices in Copenhagen and near the Danish capital are climbing so quickly, they may soon surpass pre-financial crisis levels.   “We are not yet on the cusp of another housing bubble, but we are moving towards one and we can see it,” Steen Bocian, chief economist at Danske Bank, told Børsen business newspaper.

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 2013:
  • 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)

Denmark house pricesFor 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 »


RENTAL YIELDS
Last Updated: Apr 28, 2014



Residential property prices in Denmark have been stable during the past two years (2012-2013), according to StatBank Denmark. In Copenhagen, our research suggests that the price of apartments has remained stable, with maybe some upward price movement for the smallest apartments. Meanwhile, in Copenhagen, rents have also been stable.

The result is that rental yields on apartments in Copenhagen have hardly moved over the past year. Apartments of 120 square metres (sq. m.) yield 5.18%. Apartments of 50 sq. m. yield 6.54%.

These are quite attractive yields for a European city.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Sep 23, 2013



Rental Income: Rental income subject to state income tax, from 3.67% to 15%, and municipal income tax at a flat rate of 24%. Landlords have two options when computing for taxable income: (a) itemized deductions, and (b) standard deduction to account for income-generating expenses.

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 52%. Tax on income consists of state tax, AM tax municipal tax, and church tax.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Sep 24, 2013



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.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Nov 14, 2006



Danish rental laws and practices are extremely pro-tenant.

Denmark luxury housesRent 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.”

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Jun 27, 2014


Bright prospects for 2014

Denmark propertiesDenmark has started to emerge from the fallout of 2008.  The nation returned to growth with economy expanding 1.4% y-o-y in the first quarter, following 0.4% growth in 2013.  The EU Commission predicts Danish GDP growth of 1.7% in 2014, and 1.8% in 2015.  A report last May showed consumer confidence at its highest since 2007.

“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.”

Denmark gdpIn 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 unemploymentDenmark’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%.







  • Strong and stable economy
  • Low transaction costs
  • Extremely pro-tenant market
  • Limited ownership for aliens
  • Very high rental income tax
  • Low yields in Copenhagen
RESIDENTIAL PROPERTY FACTS
Price (sq.m): €3,933 For a 120 sq. m. property, usually an apartment.
Rental Yield: 5.18% For a 120 sq. m. property, usually an apartment.
Rent/month: €2,038 For a 120 sq. m. property.
Income Tax: 3.67% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 3.04% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 24.00% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Strongly Pro-Tenant Rating is based on a detailed study of each country’s law and practice.

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