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PROPERTY

Should you buy now if you’re looking for a property in Denmark?

The housing market in Denmark has started to change, after months of high prices and high demand. But is there ever a good time to buy? We speak to property experts for some advice.

Published: 13 September 2022 16:43 CEST
Updated: 18 September 2022 06:47 CEST
Should you buy now if you're looking for a property in Denmark?
House and apartment prices are expected to fall but is this a good time to buy property in Denmark? File photo: Mathias Svold/Ritzau Scanpix

“During Covid the housing market went up and up, people had spare time and money from the government’s corona relief packages, so the housing market went up and the interest rates fell,” Mira Lie Nielsen, housing economist at Nykredit, told The Local.

“Then the gas prices started to rise and inflation rates started to follow and the war made people uncertain. But the housing market was doing fine, until we had rising interest rates, which came around March 2022. So when we hit July, we saw the first housing price drop, for both apartments and houses, falling mostly in the Copenhagen area,” Nielsen said.

According to Nielsen, from July to August, house prices fell by 0.4 percent, apartment prices fell by 0.9 percent and Copenhagen apartment prices fell by 2 percent.

“This is a normal cycle – when interest rates rise and the number of properties for sale come down,” she said.

However there has been a “visible slowdown” in the number of properties for sale, with sales in Denmark at a level last seen in 2014 for houses and 2012 for apartments, according to Nielsen.

How much further will property prices fall?

Over the next 18 months, Nielsen expects there to be a 7-10 percent drop in house prices in Denmark, perhaps 15-16 percent in Copenhagen and a 10-12 percent drop in apartment prices with an even higher price drop for Copenhagen apartments. 

“Remember property prices in Copenhagen rose 30 percent during Covid and even before then they were high, so it’s not such a shock,” Nielsen added.

To buy or not to buy?

“We always recommend you buy a property based on when your family needs it, rather than an expectation of the housing market. If you want to speculate with your money, do it on other markets rather than the housing market,” Lise Nytoft Bergmann, real estate economist and senior analyst with bank Nordea told The Local.

“We expect housing prices will go down, so if you’re worried about the value decreasing and you have a nice place to live already, then maybe it’s a good time to wait a little bit. But we don’t really recommend that you do this kind of speculation because we’ve been surprised before, such as at the beginning of the pandemic and the beginning of 2020 when many economists in Denmark believed property prices would go down and we saw opposite of that. So it can be a dangerous strategy,” Bergmann said.

Why are property prices falling?

According to Lise Nytoft Bergmann from Nordea, reasons include interest rates going up and the current high inflation rate, which puts pressure on the buyer’s economy.

Another reason for the apartment market falling in price is new property tax rules (boligskatteregler) which take effect in Denmark in 2024.

From 2024 onwards, two property taxes – ejendomsværdiskattesatser and grundskyld – will be calculated based on appraisals of the property and land value. 

Apartments are more likely to get tax increases under the new rules because the land under them has been undervalued for a long time. So a new valuation will increase the housing tax.

Existing home owners get a tax subsidy for this but new buyers will have to pay the higher housing tax rate. As prospective buyers know this is coming into effect in 2024, it could be a reason why apartment prices are already starting to fall and will continue to do so, Bergmann said.

Worth the costs of buying?

“We expect property prices to be lower in the future and there are costs connected to buying and selling a home in Denmark so it depends on expectations and what your alternative is, for example if it’s easy to find a property you can rent that you like in the area you want,” Bergmann said.

According to Bergmann, the extra costs involved in buying are around 4-5 percent of the property price. These costs include a registration fee which must be paid to the state of 1,750 kroner plus 0.6 percent of the purchasing price; and registration of the mortgage deed (pantebrev) of 1,730 kroner plus 1.45 percent of the purchase price. Banks and mortgage lenders must usually also be paid for their work related to the purchase.

The extra costs for selling are around 3-4 percent of the property price.

Mira Lie Nielsen, housing economist at Nykredit reiterates that moving house is a huge decision, financially and personally.  “Copenhagen prices are still very expensive and you have high financial costs from a loan. If you are happy where you are and can wait, it could be worth seeing what happens with the market and interest rates but if it’s right for your family to move now then it shouldn’t stop you,” she said.

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RENTING

INTERVIEW: ‘Expats are targeted in Denmark by landlords who charge excess rent’

Alex Dagil, the serial entrepreneur behind the company Rent Hero has helped over a thousand foreigners in Denmark challenge excess rents. He explained to The Local why expats are targeted and why he won't take on every case.

Published: 21 May 2024 15:53 CEST
INTERVIEW: 'Expats are targeted in Denmark by landlords who charge excess rent'

Denmark’s system of rent control is complicated, with at least four different sets of rules determining what counts as a fair rent, depending on the age, location and size of the apartment, and on what actions current and former landlords have taken to win the right to levy higher rents. 

But rent is still controlled, meaning anyone who suspects they are being overcharged can submit a complaint to their local rental board (see list here), themselves.

You can also ask Lejernes Landsorganisation (LLO, the Danish Tenants Organisation) and Dankse Lejere (Danish Tenants), two tenants unions who help members win fair rent cases. Then there are the private companies offering help reducing rents, often on a no-win, no-free basis, such as Fair Husleje and Digura. Rent Hero is alone in specialising in helping foreigners. 

READ ALSO: The four ways your rent can be regulated in Denmark

“We saw that expats were being overcharged and that they were not really any companies that tried to specifically cater to the needs of expats,” Dagil told The Local about his decision to launch the company five years ago. 

This was surprising, he said, as foreigners were and still are disproportionately affected by unscrupulous landlords.  

“Landlords who want to rent out housing at above the fair price target expats because they don’t know the rules,” he explained. “And then even if they lose a case, they limit their loss because an expat might stay in an apartment for two to three years, but if you rented out to a Dane, they might be stuck there for ten years.”

This can make a big difference to the financial impact of having excess rents corrected, he pointed out. 

If it’s decided rent should be reduced by 5,000 kroner a month, which is quite common, the landlord faces an annual loss of 60,000 kroner. If the Danish tenant remains in place for 10 years, that’s a 600,000 kroner loss. If an expat manages to get their rent reduced, they might only stay three years, limiting the loss to 180,000 kroner. 

This is why some landlords advertise apartments as available to expats only, or use expats only rental portals like Apartment in Copenhagen. 

“Those apartments are never available for Danes for the specific reasons which I mentioned before: The rent is super-overpriced, so they’re worried that it could be rented out to a Dane they would stay there for longer and and the likelihood of them being aware of rent control is probably also higher.” 

Some foreigners are of course naive, but others are simply in a hurry to get an address that can provide them with a CPR number, which can into turn allow them to get a bank account, and so start work. 

“They have a job, which they would very much like to start and they need to have a place to register their CPR, so they can get started with their life in Denmark. So they’re much more desperate in a housing market where everybody wants affordable housing,” Dagil explained.

The landlords offering these expat-targeted apartments will often claim that they’re providing a service that makes it easier for expats to settle. 

“They say ‘we’re offering this great product for expats’. Well, that’s fine. You’re doing a product targeted at expats. But there’s no place in the rental law for creative products targeted towards the needs of expats, because rent control is rent control. And they don’t see it that way,” Dagil said.

Rent Hero estimates that expats are charged on average 30 percent more in rent than Danes are for a comparable apartment, but for some expats, that’s a price worth paying. Dagil told The Local he found many expats are unwilling to challenge excess rents, even if they fully understand how much extra they are paying. 

“The primary issue that expats have is that they’re worried that if they start a case they’ll get evicted. What happens with their deposit, if they start a case? Those are the two primary issues. It’s never isolated. People don’t look at rent in isolation. They’re worried about, what if the landlord retaliates? What if they do x? What if I need to have my dishwasher switched? What happens then? It’s not necessarily the lack of information, which is the biggest thing holding people back.” 

Dagil said Rent Hero’s interests are more aligned with those of tenants than the big rental unions, as the rental unions generally want to take all cases to the rental board to challenge the rent, partly to set a precedent keeping rent under control for all tenants, even if it might not be in the interests of the individual tenant. 

Big landlords in Denmark increasingly appeal all decisions against them from rental boards to the higher housing court, largely because a new rule requires them to inform all tenants in a building if they accept a rental board’s decision, meaning they risk other tenants also seeking reduced rent. 

Often, Dagil said, this can mean tenants risk spending more on legal costs than they can get back in rent. 

“There’s a lot of cases we simply do not take – even though the client might win it at the rent board,” he explained. “If the tenant doesn’t have legal insurance, they will have to pay for that cost themselves. If you’re dealing with a case that might save 1000 kroner a year in rent, and you’re left with a potential court case that costs you 50,000 to 70,000 kroner to pursue, no one in their right mind would pursue these cases.”

Dagil argues that the two tenant unions will tend to push members to pursue such cases, whereas Rent Hero is more likely to seek a settlement with the landlord, that might not reduce rent to such a large extent but which will avoid the courts. Rent Hero, he says, will only advise clients to go to the courts if the amount they are being overcharged is sufficiently large, if the landlord is a relatively small landlord who tends not to appeal cases, or if the tenant has legal insurance. 

An article in Vi Lejere, a website run by the Danish Tenants’ Organisation, accuses Rent Hero on the other hand of levying “huge fees”, with one tenant ending up having to pay the company fully half of the excess rent they had recouped.  

Dagil does admit that Rent Hero is “maybe a bit more expensive”, than the other rent reduction companies. “But it’s very easy to get hold of us usually, and we’re also super-specialised,” he said. 

The tenants’ organisations are likely to push people to take their case to the rent board regardless, even though they only have a win rate of about 50 percent, whereas Rent Hero, with its no-win, no-pay structure has to focus on cases with a high chance of a quick win.  

“If they don’t have the conversation beforehand about legal insurance, it’s probable you will end up worse than you were before. And I think that what I try to strive towards is to be as honest as possible.” 

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