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PROPERTY

What will happen to house prices in Denmark in 2024?

As we approach the turn of the year, many homeowners and prospective buyers in Denmark may be eager to know what the future holds for property values. One thing seems certain – the market seems to be stabilising.

Published: 13 December 2023 14:21 CET
Updated: 18 December 2023 10:01 CET
What will happen to house prices in Denmark in 2024?
Is the housing market in Denmark stabilising – and does that mean prices will increase moving forward? Photo: Henning Bagger/Ritzau Scanpix

The housing market in Denmark has been on a rollercoaster ride since 2022.

Marked by uncertainties stemming from rising energy prices and fluctuating interest rates, housing prices were negatively impacted, and many people who wanted to enter the market found themselves in a challenging and uncertain position.

In March this year, the Danish Ministry of Economy predicted an 8.5 percent decline in housing prices for the year. However, by August, this figure was revised down to 4.5 percent.

In the most recent economic assessment, published on December 12th, the forecast was adjusted once again, this time indicating a more modest drop of only 2 percent for the year.

So, is the housing market in Denmark stabilising – and does that mean prices will increase moving forward?

A positive development – and optimistic 2024 and 2025 outlook

Economy Minister Stephanie Lose announced on December 12th that the government sees the positive development in the housing market as good news.

“We now assess that the housing market has stabilised. That is good news. And it will help to provide security for many Danes,” Lose said.

The government is now predicting an upturn in the housing market. The forecast suggests that house prices will increase by 1.2 percent in 2024 and a further 1.9 percent in 2025.

Lose emphasised that the forecast reflects growing confidence in the Danish economy, a recovery for the housing market, and a departure from large price drops in the coming years.

READ ALSO: What prospective homebuyers in Denmark can expect in 2024

The impact of the new property tax rules

The new property assessments are a significant factor contributing to the rebound in the Danish housing market.

The upcoming changes in Danish property tax rules mean that taxation will be based on new assessments of land and real estate values – starting next year.

These valuations, often reflecting higher property values compared to the former ones, primarily due to recent increases in housing prices, will serve as the foundation for the new property tax rates.

Note that most homeowners can expect lower property taxes under these new rules, as the tax authorities have introduced subsidies to offset any potential tax increases resulting from higher valuations.

READ ALSO: What do homeowners need to know about new Danish property tax rules?

This means existing homeowners will not face higher property taxes in 2024 compared to what they would have paid under the existing rules.

However, it’s important to note that this tax subsidy will not apply to new homeowners starting January 1st, 2024. The change has added pressure on first-time buyers, leading to a surge in housing sales – particularly in larger cities – in the lead-up to the implementation of the new tax framework.

This sense of urgency has boosted apartment prices and the number of transactions in recent months.

A drop in market activity after the New Year?

Brian Friis Helmer, an economist at Arbejdernes Landsbank, recently told broadcaster DR that the increased activity driven by these assessments may subside after the turn of the year.

This could lead to a temporary slowdown in apartment sales, particularly in the first half of the year, which might also have a knock-on effect on housing prices.

Higher mortgage interest rates for some homeowners

Some Danish homeowners, with certain mortgage types, will face higher payments starting January 1st, 2024.

Denmark’s mortgage system relies on banks financing loans through covered bonds, and recent mortgage bond auctions by Totalkredit and Realkredit have led to notably higher interest rates for one-year, three-year, and five-year fixed mortgages.

READ MORE: How much more will mortgages in Denmark cost next year?

For instance, the interest rate for a one-year fixed mortgage will be 3.88 percent, while three-year and five-year rates will stand at 3.39 and 3.37 percent, respectively. These rates represent the highest levels since the international financial crisis in 2009.

Consequently, homeowners in Denmark with existing three-year or five-year mortgages should prepare for significant increases in their monthly payments.

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RENTING

INTERVIEW: ‘Landlords who charge excess rent in Denmark target expats’

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: 'Landlords who charge excess rent in Denmark target expats'

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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