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Party is over for apartment owners - but the Danish housing market is picking up

Apartment prices are no longer rising as much as they have done – in the short term, they are flattening, in the long term, they may fall. Other homeowners can still look forward to healthy price increases. Senior Analyst Louise Aggerstrøm from our economic research team assesses trends in the Danish housing market.

Apartment prices have risen much faster than house prices across Denmark in recent years. In 2017 alone, apartment prices rose an average 7%, while house prices rose a more modest 4%. In 2018, however, the roles have reversed. While house prices continue to climb, apartment prices have lost steam. Essentially, apartment prices are no longer rising, with the rate of increase falling in Copenhagen in particular. 

According to the latest figures from Statistics Denmark, apartment prices fell close to 2% in July 2018, while house prices rose 0.1% from the level in June 2018 – and a number of indicators point to this trend continuing into the autumn.

Trend attributable to price levels and limitations on loan types

Weakening apartment prices, particularly in Copenhagen, should be viewed against both the high levels prices had reached – for example, you have never before been able to save as much by swapping an apartment in Copenhagen for a house in Western Zealand – and the limitations placed on buyers’ options with regard to loan types since the start of the year, which have dampened buyer interest.

This is also reflected in the decline in sales activity, with the market for project sales seeming to be under particular pressure. Moreover, the number of apartments on the market has increased markedly since the start of the year and is now 50% higher than one year ago. Nevertheless, sales activity is still at a high level, and while the number of apartments on the market has increased, it is still considerably lower than during the crisis.

Louise Aggerstrøm

Senior Analyst, Danske Bank

Assessment:  Prices to flatten in the short term – may fall in the long term
We generally expect prices to be flat in the Copenhagen apartment market in the coming period, although there is a risk that prices may fall. However, rising interest rates and new property valuations – which will particularly affect apartments in expensive areas – could mean a further fall in prices in coming years.

Other homeowners can look forward to healthy price increases

That said, the Copenhagen apartment market constitutes less than 4% of the total owner-occupied housing market in Denmark. Consequently, we continue to believe that the large majority of Danish homeowners can look forward to healthy price increases.