Market in Depth

Denmark's housing market continues to grow

Lalaine C. Delmendo | January 11, 2022

Denmark's house price rises continue to accelerate, raising worries among policymakers. “During the pandemic, the Danish housing market has been characterised by both high trading activity and rapidly rising prices,” said the DanmarksNationalBank in its H1 2021 Financial Stability report. “Sharp increases in housing prices increase the risk of subsequent price decreases.”

The price index of one-family houses in Denmark soared by 14% (12.1% when adjusted for inflation) in May 2021 from a year earlier, after y-o-y increases of 4.8% in 2020, 3% in 2019, 3.9% in 2018 and 4% in both 2016 and 2017, according to Statistics Denmark. It was the third consecutive month of double-digit increase and one of the highest y-o-y increases ever recorded.

Prices continued to rise for all property types and for almost all regions during the year to June 2021, according to the Association of Danish Mortgage Banks (ADMB):
  • The average asking price on owner-occupied flats for sale rose by 11.6% y-o-y to DKK38,145 (EUR5,128) per square metre (sq. m).
  • Detached/terraced house prices rose by 11.1% y-o-y to an average of DKK18,910 (EUR2,542) per sq. m.
  • Holiday home prices rose strongly by 22.1% y-o-y to an average of DKK23,859 (EUR3,208) per sq. m.

By region, during the year to June 2021:<
  • In the Capital region, i.e. Copenhagen and its hinterland, the average asking price of owner-occupied flats soared by 14.4% y-o-y to DKK49,576 (EUR6,665) per sq. m.
  • In North Jutland, house prices rose strongly by 11.8% y-o-y to an average of DKK22,929 (EUR3,082) per sq. m.
  • In Central Denmark, house prices rose by 8.8% y-o-y to DKK30,984 (EUR4,165) per sq. m.
  • In Southern Denmark, house prices increased 1.9% to an average of DKK22,070 (EUR2,967) per sq. m.
  • In Zealand region, asking prices for owner-occupied flats fell slightly by 0.7% y-o-y to an average of DKK21,136 (EUR2,841) per sq. m.

Demand continues to rise rapidly despite the pandemic, buoyed by negative mortgage interest rates. In the first quarter of 2021, sales of detached/terraced houses rose by 40% to 13,632 units from a year earlier, following annual growth of 15.4% in 2020, according to ADMB. Likewise, sales of owner-occupied flats rose by 37% y-o-y to 4,980 units in Q1 2021 while holiday home sales almost doubled to 3,662 units over the same period.

To cool the housing market, the DanmarksNationalBank suggests higher downpayment  and amortisation requirements for highly indebted homeowners. Danish households are the most indebted people in the OECD, with an average personal debt equivalent to 258.3% of net disposable income in 2020.

“With rapidly rising housing prices and an existing basis for further price increases, there is reason to look at a tightening of the lending rules to limit vulnerability to a subsequent drop in housing prices,” said the central bank. “At its next meeting, the Systemic Risk Council expects to recommend to the Danish Government that further measures be taken to limit continued risk build-up in the housing market.”

Denmark house prices
The Danish economy contracted by 3.3% y-o-y in 2020, the biggest decline since 2009, when the economy shrunk by 4.9% due to the global financial crisis, according to the International Monetary Fund (IMF). In Q1 2021, real GDP fell by another 0.8% y-o-y, after annual declines of 0.5% in Q4 2020, 2.2% in Q3 and 8% in Q2,largely due to declines in household spending.

The country's Ministry of Finance projects the economy to grow by a modest 2.4% this year and by another 3.6% in 2022. The European Commission is more optimistic, estimating that the Danish economy will expand by 3% this year.

Analysis of Denmark Residential Property Market »

Rental Yields

Copenhagen’s rental yields range from 4.84% to 5.31%

Residential property prices in Denmark have been stable during the past three years (2012-2014), 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 two years. Apartments of 120 square metres (sq. m.) yield 4.84%. Apartments of 50 sq. m. yield 5.27%.

These are moderate yields.

Read Rental Yields »

Taxes and Costs

Taxes are moderate in Denmark

Rental Income: Rental income subject to state income tax, from 0% 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 52.06%. Tax on income consists of state tax, AM tax, municipal tax, and church tax.

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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 1.23% to 3.23% of the property value. The greater part of the costs is accounted for by the real estate agent’s commission at 0.5% to 2%, usually paid by the seller.

Read Buying Guide »

Landlord and Tenant

Strongly pro-tenant laws in Denmark

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 »


Economy to grow modestly, unemployment falling again

The Danish economy contracted by 3.3% y-o-y in 2020, the biggest decline since 2009 when the economy shrunk by 4.9% due to the global financial crisis, according to the International Monetary Fund (IMF). Then in Q1 2021, real GDP fell by another 0.8% y-o-y, following annual declines of 0.5% in Q4 2020, 2.2% in Q3 and 8% in Q2,largely due to the fall in household spending.

Despite the weak start this year, the country’s Ministry of Finance projects the economy to grow by a modest 2.4% this year and by another 3.6% in 2022. The European Commission is even more optimistic, which estimates the Danish economy to expand by 3% this year.

“Together with the vaccine rollout and the gradual reopening, we now see the result of the government and the Folketing (Danish Parliament) holding the hand of Danish employees and companies with a historic fiscal policy effort throughout the crisis," said Minister for Finance Nicolai Wammen.

Denmark gdp
Before the pandemic, the Danish economy has been expanding by an average of 2.7% annually from 2015 to 2019, up from an annual average growth of 1.2% in 2010-14.

Denmark’s public finances have improved significantly in recent years, with surpluses of DKK33.1 billion (EUR4.45 billion) in 2017, DKK10.7 billion (EUR1.44 billion) in 2018 and DKK84.9 billion (EUR11.41 billion) in 2019. Last year, the government estimated that the public sector balance registered a loss of about DKK25.6 billion (EUR3.44 billion), as a result of increased financing needs related to COVID-19.

As percent of GDP, Denmark recorded a deficit of 1.1% in 2020, in contrast to surpluses of 3.8% of GDP in 2019, 0.7% in 2018 and 1.8% in 2017, according to figures from Statistics Denmark.

The country’s government debt surged to 42.2% of GDP in 2020, sharply up from 33.9% of GDP in 2019.

Denmark unemployment
Inflation stood at 1.7% in June 2021, up from just 0.3% in the same period last year, according to Statistics Denmark. Inflation is expected to accelerate to 1.5% this year, the highest level since 2012, according to the European Commission.

The labour market is now gradually returning to normal. Denmark’s unemployment stood at 3.5% in June 2021, down from 5% in June 2020 and now at par with its 2019 pre-pandemic level, according to figures released by Statistics Denmark.

In June 2021, the jobless rate for men and women in Denmark stood at 3.4% and 3.7% respectively. Overall unemployment rose to 4.5% last year, from an annual average of 3.9% from 2016 to 2019.

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