Denmark’s housing market conditions worsening

Denmark’s housing market conditions continue to worsen, amidst rising interest rates and slowing economic growth. Demand remains subdued. The residential construction sector is struggling. And, house prices continue to fall.

In Q3 2023, the average price of detached/terraced houses in Denmark fell by 1.3% to DKK 16,227 (€2,177) per sq. m as compared to a year earlier, according to figures from the Association of Danish Mortgage Banks (ADMB). It was the fifth consecutive quarter of a y-o-y price fall. When adjusted for inflation, nationwide house prices dropped 3.4% over the same period.

Quarterly, detached/terraced house prices were up slightly by 1.2% (0.1% inflation-adjusted) in Q3 2023.

“There is a clear decline in private spending and a sharp fall in house prices in Denmark due to higher interest rates and erosion of purchasing power resulting from very high inflation,” said Danmarks NationalBank, the country’s central bank.

Denmark’s house price annual change

For other property type, during the year to Q3 2023:

  • The average transaction price on owner-occupied flats for sale increased slightly by 0.3% y-o-y to DKK 33,674 (€4,517) per sq. m. But prices dropped 1.9% when adjusted for inflation. Yet quarterly, prices increased by a modest 3.4% in Q3 2023.
  • Holiday home prices fell by 1.6% (-3.7% inflation-adjusted) y-o-y to an average of DKK 21,270 (€2,853) per sq. m. Quarter-on-quarter, prices were down 1.5% during the latest quarter.

Denmark Average House Price per SQM graph

 This is supported by figures released by Statistics Denmark, which showed that the price index of one-family houses in Denmark fell by 3% (-6.3% inflation-adjusted) in Q2 2023 from a year earlier, following y-o-y declines of 5.9% in Q1 2023, 5.7% in Q4 2022 and 2.1% in Q3 2022. Though quarterly, nationwide house prices rose by a modest 2.5% (2.8% inflation-adjusted) in Q2 2023, indicating that the rate of fall has decelerated.

After plummeting last year, demand remains weak this year. In the first three quarters of 2023, sales of detached/terraced houses fell slightly by 0.4% to 29,127 units from a year earlier, according to the ADMB. While sales of owner-occupied flats increased by a modest 3.6% y-o-y to 9,960 units in Q1-Q3 2023, holiday home sales were down by 3.3% to 5,035 units over the same period.

Residential construction activity is also plummeting. Residential permits suffered a y-o-y fall of more than 39% in the first three quarters of 2023. Dwelling starts and completions also dropped 36% and 2.3%, respectively. As of September 2023, dwellings under construction plunged by 48.5% y-o-y to just 27,362 units, the lowest level in more than seven years.

Denmark’s housing market is expected to remain weak in the medium term, with Danmarks NationalBank projecting a cumulative house price fall of 3.2% in 2023. House prices are expected to increase by a minuscule 0.7% in 2024.

“Market expectations indicate that interest rates will drop only slightly over the coming years; as a result, interest rates, along with an expected contraction in employment, will continue to dampen house price growth. Single-family house prices are projected to drop 3.2 percent in 2023 and then grow 0.7 and 2.1 percent, respectively, in 2024 and 2025,” said Danmarks NationaBank in its Outlook for the Danish Economy report published in September 2023.

“New housing taxes will take effect on 1 January 2024. This will restore the effect of a key automatic stabilizer in the housing market, given that housing taxes will again rise and fall with house prices, which will dampen house price fluctuations. The housing tax reform will create a more uniform tax regime across geography and property types. Viewed in isolation, the new housing taxes are expected to translate into a small increase in house prices and a small price drop for owner-occupied flats, but they will help dampen price fluctuations going forward,” the central bank added.

Denmark’s economic growth is estimated to have slowed sharply in 2023, primarily due to weaker external demand, coupled with high inflation and tightening financial conditions. The International Monetary Fund (IMF) projected that the Danish economy grew by just 1.7% in 2023 while the European Commission released a gloomier outlook, projecting a miniscule growth of 1.2%. This is a sharp slowdown from real GDP growth rates of 6.8% in 2021 and 3.8% in 2022.

Regional house price variations

ADMB figures showed that local housing markets in most Danish regions remained depressed, amidst weak property demand.

By region:

  • In the Capital Region, i.e. Copenhagen and its hinterland, the average transaction price of owner-occupied flats increased slightly by 1.2% (but fell by 1% when adjusted for inflation) y-o-y to DKK 43,646 (€5,854) per square meter (sq. m.) in Q3 2023. This was a sharp slowdown from the y-o-y growth of 5% in Q2 2022 and 17.1% in Q2 2021.
  • In Southern Denmark, house prices fell by 9.8% (-11.7% inflation-adjusted) to an average of DKK 17,825 (€2,391) per sq. m. over the same period.
  • In Central Denmark, house prices dropped 2.2% (-4.3% inflation-adjusted) y-o-y to DKK 26,359 (€3,536) per sq. m. in Q3 2023.
  • In the Zealand region, transaction prices for owner-occupied flats rose by 2.4% (0.2% inflation-adjusted) y-o-y to an average of DKK 20,398 (€2,736) per sq. m. in Q3 2023 – an improvement from the prior year’s 1.7% price fall.
  • In North Jutland, house prices were up by a meager 1.1% (but fell by 1% when adjusted for inflation) y-o-y to an average of DKK 19,290 (€2,587) per sq. m. in Q3 2023.

Denmark Average Prices of Owner-Occupied Flats graph

A brief history of Denmark’s 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 fueled 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 3.94% (3.24% in real terms)
  • 2020: up by 6.35% (5.87% in real terms)
  • 2021: up by 9.63% (6.28% in real terms)

However, the housing market started to slow in 2022. Nationwide house prices fell by 5.51% (-13.5% in real terms) y-o-y in 2022, as demand plummets due to rising interest rates and falling purchasing power of homebuyers caused by high inflation last year.

Demand remains weak

Property demand in Denmark remains weak in the first three quarters of 2023:

  • Detached/terrace houses: 29,127 units sold in Q1-Q3 2023, down slightly by 0.4% from a year earlier, according to the ADMB.
  • Owner-occupied flats: 9,960 units sold, up by 3.6% from the previous year.
  • Holiday homes: 5,035 units sold, down by 3.3% from a year earlier.

However, it is interesting to note that in the Capital Region, property transactions are increasing. Detached/terraced house sales rose strongly by 20% y-o-y to 6,593 units in the first three quarters of 2023. Likewise, sales of owner-occupied flats and holiday homes also increased by 10.3% to 6,425 units, and by 1.6% to 906 units, respectively.

During 2022, sales of one-family houses nationwide plunged by 30% to 46,120 units from a year earlier, following annual increases of 8.4% in 2021 and 17.1% in 2020, according to figures from Statistics Denmark. It was its first decline since 2011. Likewise, sales of owner-occupied flats plummeted by 35.3% y-o-y to just 14,604 units in 2022, in contrast to annual growth of 5.1% in 2021 and 13.8% in 2020.

Denmark Residential Property Sales graph

Time-on-market to sell a residence in Q3 2023:

  • Detached/terrace house average days-on-market stood at 132 days in Q3 2023, slightly down from 135 in the previous quarter but sharply up from 113 a year earlier, based on ADMB figures.
  • Owner-occupied flat average days-on-market was 97 in Q3 2023, down from 104 in the previous quarter but up from 88 in the same period last year.
  • Holiday home average days-on-market was 119 in Q3 2023, down from 123 in the previous quarter but up from 113 a year earlier.

Denmark Time on Market graph

Residential construction remains depressed

Residential construction activity started to plummet in 2020, due to coronavirus-related restrictions, and they haven’t recovered since. In the first nine months of 2023, all housing construction indicators showed a downward trend:

  • Residential construction permits fell sharply by 39.4% y-o-y to just 16,657 units in the first nine months of 2023, following annual declines of 23.8% in 2022, 4.1% in 2021, 4.4% in 2020, and 4.9% in 2019, according to Statistics Denmark.
  • Dwelling starts plunged by 36% to 16,819 units in Jan-Sep 2023 as compared to the same period in the prior year, following a huge decline of 38.5% during 2022, an increase of 7% in 2021 and another fall of 8.1% in 2020.
  • Dwelling completions fell slightly by 2.3% y-o-y to 27,268 units in the first nine months of 2023, after an annual growth of 9.1% in 2022, a fall of 4.9% in 2021, and increases of 11.8% in 2020 and 18.8% in 2019.
  • Dwellings under construction fell sharply by 48.5% y-o-y to just 27,362 units as of September 2023, the lowest level in more than seven years.

Denmark Residential Construction graph

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 that 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.

In 2023, dwelling stock in Denmark reached 4.82 million, up by 0.9% from a year earlier, according to Statistics Denmark. About 48% of dwellings are owner-occupied while 51% are occupied by tenants.

South Denmark and Central Jutland accounted for about 25% share each of the total dwelling stock, followed by Zealand (18.8%), Capital (17.7%), and Northern Jutland (13.4%).