Denmark Real Estate Market Analysis 2022

Denmark’s housing market is noticeably cooling, amidst rising interest rates coupled with slowing economic growth. Demand is now plunging. Residential construction activity remains depressed. And, house price growth is decelerating.

The price index of one-family houses in Denmark rose by 5.5% in Q1 2022, a slowdown from y-o-y increases of 8.1% in Q4 2021, 10.7% in Q3, 13.5% in Q2, and 12.3% in Q1, based on figures released by Statistics Denmark. When adjusted for inflation, house prices increased by a minuscule 0.6%.

Denmark’s house price annual change

On a quarterly basis, house prices rose by 1.1% in Q1 2022 but actually declined by 1.1% in real terms.

Prices continued to rise for almost all regions and for all property types in Q1 2022, albeit at a much slower pace as compared to a year ago, according to the Association of Danish Mortgage Banks (ADMB).

By region:

  • In the Capital Region, i.e. Copenhagen and its hinterland, the average asking price of owner-occupied flats rose by 8.4% (3.4% inflation-adjusted) y-o-y to DKK44,945 (€6,044) per square meter (sq. m.). This was a slowdown from the prior year’s 14.3% price growth.
  • In the Zealand region, asking prices for owner-occupied flats rose slightly by 1.8% (-3% inflation-adjusted) y-o-y to an average of DKK20,272 (€2,726) per sq. m. – a sharp slowdown from an 8.4% increase in Q1 2021.
  • In North Jutland, house prices increased 3% (-1.8% inflation-adjusted) y-o-y to an average of DKK19,213 (€2,583) per sq. m.
  • In Central Denmark, house prices rose by 3.8% (-1% inflation-adjusted) y-o-y to DKK27,284 (€3,669) per sq. m.
  • In Southern Denmark, house prices increased 5.1% (0.2% inflation-adjusted) to an average of DKK19,068 (€2,564) per sq. m.

Denmark avg prices pwner occupied flats

By property type, during the year to Q1 2022:

  • The average transaction price on owner-occupied flats for sale rose by 7.1% (2.1% inflation-adjusted) y-o-y to DKK34,370 (€4,622) per sq. m.
  • Detached/terraced house prices rose by 6.2% (1.2% inflation-adjusted) y-o-y to an average of DKK16,705 (€2,246) per sq. m.
  • Holiday home prices increased 5.8% (0.8% inflation-adjusted) y-o-y to an average of DKK20,148 (€2,709) per sq. m.

Demand is falling sharply. In the first quarter of 2022, sales of detached/terraced houses plunged 29% to 10,254 units from a year earlier, following annual growth of 6% in 2021 and 15.2% in 2020, according to ADMB. Likewise, sales of owner-occupied flats fell by 27.8% y-o-y to 3,916 units in Q1 2022 while holiday home sales plummeted by 57.4% to 1,559 units over the same period.

Denmark avg house price sqm

The housing market will continue to slow in the medium-term, amidst rising costs of borrowing and surging inflation. Based on the recent forecast released by Danish bank Handelsbanken, property prices in the country will fall by 10% to 15% by end-2023.

“We expect that the many headwinds for the housing market will lead to price drops for the country as a whole, and these will become clearer after the summer,” said Handelsbanken’s senior economist Jes Asmussen. “And we would certainly not rule out such marked price drops in the most expensive areas like the apartment market in Copenhagen, which will also be impacted by a property tax reform that takes effect in 2024.”

The Danish economy grew by 4.9% y-o-y in 2021, fully offsetting the 2% contraction seen in 2020, mainly driven by a rebound in domestic demand and strong investment, according to the European Commission (EC).

Despite a strong start this year, with a registered real GDP growth rate of 6.2% y-o-y in Q1 2022, the country’s economic growth is expected to slow to a modest 3.5% this year, mainly due to the adverse impact of the Russian invasion of Ukraine, as well as the continued pandemic-related uncertainty, according to the Ministry of Finance. The IMF is even more pessimistic, projecting economic growth of 2.3% for the full year of 2022.

Housing boom and bust

Denmark has been through several vigorous boom-bust cycles. From Q1 2003 to Q2 2007, the national average house price rose 75.4%, or 63.6% in real terms, based on figures from the Association of Danish Mortgage Banks (ADMB). Prices in the capital region rose by 88.3% (75.6% in real terms). Property prices peaked in Q2 2007.

Then from Q2 2007 to Q3 2009, property prices fell by about 15.4% (-19.3% in real terms) due to the global financial meltdown. In the capital region, the decline was 25.3% (-28.8% in real terms). The regions that experienced the highest price rises during the boom generally had the biggest price falls.

From Q3 2009 to Q3 2010 there was a short-lived recovery. But property prices fell again by about 9% from Q4 2010 to Q4 2012, due to the eurozone debt crisis.

The housing market has improved gradually since then, with house prices rising by 1.38% (0.71% in real terms) in 2013 and by 1.83% (1.35% in real terms) in 2014. The Danish housing market strengthened in the following years, thanks to robust demand fuelled by negative interest rates.

Performance of the housing market since 2015:

  • 2015: house prices were up by 6.57% (6.17% in real terms)
  • 2016: up by 4.18% (3.8% in real terms)
  • 2017: up by 5.19% (3.88% in real terms)
  • 2018: up by 3.48% (2.67% in real terms)
  • 2019: up by 3.9% (3.2% in real terms)
  • 2020: up by 6.46% (5.87% in real terms)
  • 2021: up by 9.72% (6.4% in real terms)

Demand falling sharply

In the first quarter of 2022, sales of detached/terraced houses plunged 29% to 10,254 units from a year earlier, following annual growth of 6% in 2021 and 15.2% in 2020, according to ADMB.

Denmark residential property sales

Likewise, sales of owner-occupied flats fell by 27.8% y-o-y to 3,916 units in Q1 2022 while holiday home sales plummeted by 57.4% to 1,559 units over the same period.

Time-on-market to sell a residence in Q1 2022:

  • Detached/terrace house average days-on-market stood at 141 in Q1 2022, sharply up from 119 in the previous quarter but down from 153 a year earlier, according to the ADMB.
  • Owner-occupied flat average days-on-market was 96 in Q1 2022, up from 87 in the previous quarter and 92 in Q1 2021.
  • Holiday home average days-on-market was 167 in Q1 2022, sharply up from 125 in the previous quarter but still down from 192 a year earlier.

Residential construction remains depressed

Residential construction activity started to plummet in 2020, due to coronavirus-related restrictions, and they haven’t recovered since.

Denmark residential construction

All housing construction indicators showed a downward trend:

  • Residential construction permits fell by 20.5% y-o-y to just 26,017 units in 2021, following a 16.8% decline in 2020, according to Statistics Denmark. It was the lowest since 2015.
  • Starts plunged by 22% y-o-y to 24,925 units in 2021, after falling by 19.6% in the previous year.
  • Completions fell by 6.6% y-o-y to 35,556 units in 2021, following annual growth of 11.1% in 2020.
  • Dwellings under construction fell sharply by 23.7% to 34,140 units in 2021 from a year earlier, after a decline of 12.1% in the prior year.

The decline continued this year, with starts suffering the biggest y-o-y fall of more than 64% in Q1 2022. Permits, completions, and under construction also dropped by 16.7%, 20.6%, and 31.3%, respectively.

Before the Covid-19 pandemic, construction activity had been rising strongly. Newly designated development areas have been built close to the center of Copenhagen.

  • Ørestad - Between the city center, the airport, and the Øresund Bridge, Ørestad is a new business and residential district measuring 3.1 million sq. m. The city’s main convention center, some of the region’s largest hotels, universities, and multinational corporations are located in Ørestad. It is now home to around 10,000 residents.
  • Carlsberg City District - Carlsberg, in the center of Copenhagen, has new houses, schools, and offices, mixed with historical buildings. Recent projects include Bohr’s Tower (88 apartments), Ottilia House (27 residences), and Jacobsen House (exclusive residences).
  • Nordhavn - Previously an industrial and commercial harbor, Nordhavn is being converted into a residential and commercial district. Schools, daycare centers, and sports facilities are also being developed.

Other parts of Copenhagen which experienced an upsurge in construction before the pandemic include the southern part of Copenhagen Harbour, the eastern area of Amager, and the southwestern part of the Capital.

Denmark dwelling stocks

In 2022, dwelling stock in Denmark reached 4.77 million, up by 1.27% from a year earlier, according to Statistics Denmark. About 48% of dwellings are owner-occupied while 51% are occupied by tenants.

Mortgage rates are rising

Mortgage interest rates in Denmark are noticeably increasing. Yet they remain one of the lowest in the world.

  • The short-term mortgage rate averaged -0.52% in 2021, from -0.5% in 2020, -0.6% in 2019, -0.51% in 2018, -0.55% in 2017, -0.29% in 2016,  and -0.16% in 2015, according to the ADMB.
  • The long-term mortgage rate averaged 1.45%, up from 1.15% in 2020, but still down from 1.61% in 2019, 2.12% in 2018, 2.26% in 2017, 2.57% in 2016, and 2.77% in 2015.

Denmark avg mortgage rates

During the first 31 weeks of 2022, the short-term mortgage rate averaged 0.02% while the long-term mortgage rate rose sharply to 3.09%.

The Danish mortgage market remains stable

The size of the Danish mortgage market was equivalent to 123.6% of GDP in 2021, at par with its pre-pandemic level but still down from 133.1% in 2009. Total mortgages outstanding have risen by an average of 2.7% annually from 2009 to 2021, after annual growth of 7.8% from 1998 to 2008.

Denmark outstanding mortgage loans

In Q2 2022, total mortgage loans outstanding rose by 3.5% y-o-y to DKK 3.1 trillion (€418.2 billion), according to the Association of Danish Mortgage Banks. Over the same period:

  • Fixed-rate mortgages loans: down slightly by 0.7% y-o-y to DKK1.41 trillion (€189.1 billion)
  • Variable-rate mortgage loans: up 7.2% y-o-y to DKK1.7 trillion (€229.1 billion)

It seems that Danes are shifting back to variable-rate loans, amidst rising interest rates. In Q2 2022, variable-rate mortgages accounted for 54.8% of total loans, up from 52.9% in the same quarter last year.

Denmark arrears

Before the increase in interest rates, the share of variable-rate loans had been continuously falling. In 2021, variable-rate mortgages accounted for less than 53% of total loans – down from 57% in 2020, 60.5% in 2019, 64% in 2018, 65.6% in 2017, 66.7% in 2016, 68.2% in 2015, 72.1% in 2014, 72.6% in 2013 and 73.2% in 2012.

Denmark repossesed dwellings

Mortgage arrears remain low at 0.13% in Q1 2022, at par from last year but down from 0.16% in 2020 and 0.24% in 2019, based on figures from ADMB. Likewise, the number of repossessed dwellings continues to drop to only 19 units in H1 2022, from 37 units in H1 2021, 91 in H1 2020, and 138 in H1 2019.

High household debt risks are mitigated by high levels of savings and net worth

Danish households’ average personal debt is equivalent to 248% of net disposable income in 2021, according to the Organisation for Economic Cooperation and Development (OECD), the highest in the European Union. But this is down from 258% in 2020, 293% in 2015, 306% in 2013, 320% in 2011, and 340% in 2009, and Denmark’s banking system remains well positioned and well capitalized.

Mortgage debt accounts for about 80% of household debt, according to Fitch Ratings.

“The Danish household sector is the most indebted of EU and OECD countries (with debt 248% of net disposable income, 2021, OECD), but also with the highest net worth (956% of net disposable income),” said Fitch Ratings in its August 2022 rating update for Denmark. “Macro-financial stability risks derived from higher interest rates given high levels of household indebtedness are somewhat mitigated by a high level of domestic savings and Danish banks´ strong capital buffers.”

Fitch Ratings notes that the country’s rising interest rates increase household debt costs and could heighten some vulnerabilities, as demand for variable-rate loans has increased in recent months. But these risks to households’ debt serviceability are lessened by a high savings ratio and the benefit of tax deductibility of interest costs. Fitch Ratings also added that the banking sector remains strongly capitalized, with high liquidity and profitability.

Higher downpayment and amortization requirements recommended

In its H1 2022 Financial Stability report, the DanmarksNationalBank has recommended the imposition of higher downpayment and amortization requirements for highly indebted homeowners to make the housing market more resilient.

“A general requirement for a larger down payment and a requirement of amortization on loans for homeowners with a high loan-to-value ratio are both measures that can contribute to a more resilient housing market,” said the central bank. “More stringent down payment and amortization requirement for highly indebted homeowners are also among the measures highlighted by the IMF to counteract increased risks in the housing market in Denmark.”

The central bank also warned that the widespread use of deferred amortization increases the vulnerabilities of homeowners to a subsequent fall in house prices. As such, it should be limited to the most resilient homeowners.

“Deferred amortization on mortgage loans may be a sensible choice if homeowners with a loan-to-value ratio above 80 percent use the deferred amortization period to reduce more expensive supplementary bank loans more quickly,” said the central bank. “In practice, however, a large part of homeowners with a loan-to-value ratio of 95 percent only partially use their deferred amortization for this purpose. This makes some homeowners with high indebtedness less resilient to a subsequent drop in housing prices.”

Effective January 1, 2018, banks have been limited from offering housing loans that do not have fixed interest rates or monthly installments. Moreover, mortgages available to households seeking to borrow more than four times their income or more than 60% of the value of the property, are heavily restricted.

Rental yields moderate to good, despite a highly regulated market

Yields have recovered in Denmark in recent years, as rents have risen faster than house prices. Average gross rental yields in Copenhagen typically range from 4.84% to 5.31%, according to Global Property Guide research. Unsurprisingly, smaller apartments offer higher rental yields. Apartments of 120 square meters (sq. m.) yield 4.84% while apartments of 50 sq. m. yield 5.27%.

Nevertheless, few new private rental dwellings are now being built, largely because the private rental market is strongly pro-tenant (see Landlord and Tenant section).

Only rental dwellings constructed after 1991 are exempt from rent control (less than 1% of dwelling stock, or about 10,000 to 15,000 units). Otherwise, rents are non-responsive to market forces because there are five different forms of rent control, depending upon the age of the building. There is also a huge social rental sector.

Further discouraging landlordism, owner-occupied dwellings receive generous benefits from the government. Aside from mortgage tax relief, house owners are also entitled to a standard deduction for home maintenance. About 21% of households in Denmark receive housing subsidies from the government, the highest rate in the EU. Although there has been a slight decline in owner-occupancy in favor of social housing, this is due to the rise of single-person households.

Denmark is not open to foreign buyers

Despite Denmark’s liberal reputation, it is not easy to acquire property here.

Nonresidents may not purchase real property here unless the person:

  • Has previously resided in Denmark for at least five years;
  • Is an EU national working in Denmark; or,
  • If a non-EU national has a valid residence or business permit.

Even tighter restrictions on foreign ownership exist particularly for summer homes in coastal areas. These are popularly known as the ‘anti-German rules’; because they are designed to prevent coastal areas from being overrun by German second homeowners.

However, the purchase of "all-year-round" properties, which are not located in popular areas along the coast, is possible as long as you satisfy the aforementioned requirements.

Economic growth slows, inflation accelerates

The Danish economy grew by 4.9% y-o-y in 2021, fully offsetting the 2% contraction seen in 2020, mainly driven by a rebound in domestic demand and strong investment, according to the European Commission (EC).

“The rebound in activity was led by strong domestic demand. Private consumption normalized amid the easing of containment measures. Investment remained solid as economic prospects brightened. Public consumption also had a positive impact as the pandemic support continued,” said the IMF in its June 2022 Article IV Consultation with Denmark.

Despite a strong start this year – registering a real GDP growth rate of 6.2% y-o-y in Q1 2022 – the country’s economic growth is expected to slow to a modest 3.5% this year, mainly due to the adverse impact of the Russian invasion of Ukraine, as well as the continued pandemic-related uncertainty, according to the Ministry of Finance. The IMF is even more pessimistic, projecting economic growth of 2.3% for the full year of 2022.

Denmark gdp inflation

“The activity in the Danish economy has been remarkably high. Russia’s invasion of Ukraine will, however, have inevitable consequences for both the global economy and dampen the increase in economic activity at home,” said the Ministry of Finance.

“The greatest and most direct effect on the Danish economy is through higher prices on energy and other raw materials. Higher prices weaken the purchasing power of households and increase costs for businesses. This will affect Danish exports through lower growth in export markets. Greater uncertainty can also affect the economy if business investments are postponed and consumers show restraint. Consumer confidence has fallen considerably.”

Prior to the pandemic and now the Ukraine crisis, 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.

Government finances are gradually improving again. As a percent of GDP, Denmark recorded a surplus of 2.3% in 2021, following a deficit of 0.2% in 2020 and surpluses of 4.1% in 2019 and 0.8% in 2018, according to figures from Statistics Denmark.

The country’s government debt stood at 36.7% of GDP in 2021, down from 42.1% in 2020 but still up from 33.6% in 2019.

Denmark unemployment

Inflation surged to 8.7% in July 2022, sharply up from 1.6% in July 2021, according to Statistics Denmark. Inflation is expected to accelerate to 7.5% this year, sharply up from just 1.9% in 2021 and 0.3% in 2020, and the highest level in 40 years, according to the European Commission.

The labor market remains tight. Denmark’s unemployment stood at 2.4% in June 2022, down from 3.5% in June 2021 and 5% in June 2020, according to figures released by Statistics Denmark. Over the same period, the jobless rate for men and women in Denmark stood at 2.1% and 2.8% respectively. Overall unemployment averaged 6.3% from 2011 to 2021.