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TAXES

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

Denmark is set to implement new laws from January 1st 2024 that will impact the way property tax is calculated. Here’s what homeowners should know.

Published: 25 July 2023 16:08 CEST
Updated: 6 August 2023 12:30 CEST
What do homeowners need to know about new Danish property tax rules?
New property tax rules will apply in Denmark from next year. File photo: Ida Marie Odgaard/Ritzau Scanpix

New property tax rules adopted by parliament back in 2017 will mean 4 in 5 homeowners will pay a lower rate of property tax, according to an outline of the changes issued by bank Nykredit.

But the remaining homeowners need not be concerned about the impact on their private finances, because they will be given subsidies intended to insure their property tax burden does not go up as a result of the new rules.

On the other hand, as The Local reported in an earlier article, future homeowners could face a different property tax bill once the new rules have taken effect, compared to if they had purchased their home before 2024.

READ ALSO: EXPLAINED: Denmark’s new property tax rules from 2024

The new property tax rules are designed to keep property tax stable as new property valuations, on which taxes are calculated, come into effect.

In short, homeowners will from 2024 onwards pay property tax based on valuations of their property made in 2022, an update from older data.

For most people, the new valuations will be higher than the older ones, because house prices have generally risen in the intervening years. Houses and apartments in and around major cities have seen their values increase the most.

In response to the rising valuations, parliament adopted a new property tax law (ejendomsskattelov). The new law means that property value tax rates (ejendomsværdiskattesatser) and land value tax (grundskyld) will both be reduced from next year.

In other words, the higher valuation of your home will push your property tax up, but a lower rate will make sure you pay around the same amount.

Several other aspects of the law have also been introduced to protect homeowners from a sharp tax rise.

Existing homeowners will be given a tax deduction if the valuation of their property has increased so much that they owe more than before the reform, even after the lower rate is applied. The purpose of the subsidy is to ensure homeowners don’t pay more in property tax in 2024 than they did on the same home under the old rules. The deduction is applied to their property tax annually for as long as they own the home.

If the property valuation – and therefore tax – goes up again at a later date, the homeowner will be able to freeze their tax payment through a special loan.

Collection of the land value tax (grundskyld) has meanwhile been moved from municipalities to the state under the new rules, in a change designed to simplify the system. This means that land value tax will be collected in the annual tax return (årsopgørelsen) instead of through a bill issued by the local municipality.

Individual amounts that will be due in property tax in 2024 will be displayed in the preliminary tax return or forskudspgørelse for the year. These preliminary returns are issued in the preceding November – so November 2023 for the 2024 taxes.

More information in the new rules can be found (in Danish) here.

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PROPERTY

Busiest August for housing in Denmark in three years as sales bounce back

The number of properties a month sold in Denmark continued to bounce back in August, according to new data, with a surge in summer house sales pushing the market to the busiest August in three years.

Published: 19 September 2024 10:42 CEST
Busiest August for housing in Denmark in three years as sales bounce back

A total of 7,248 residential properties were sold this August, according to the latest statistics from the Boligsiden housing website, 1.2 percent up on July and 1.4 percent up on August 2023, with sales being driven by the buoyant market for summer houses and owner-occupied apartments. 

“We are now back at a level similar to what we had a few years back, before interest rates started to rise,” Mira Lie Nielsen, an economist at Nykredit, told the Ritzau newswire. “There have been high wage increases, interest rates are on the way down, and then there is a low supply of apartments, which means that both the prices, but also the transactions, are climbing nicely again.”

Below you can see a diagram by Boligsiden showing the number of properties sold in August over each of the past six years, showing the peak during the Covid-19 pandemic in 2020.

Source: Boligsiden

Birgit Daetz, housing economist and communications director at Boligsiden, said that the increase in sales between July in August, although smaller than usual, did not mean the market was slowing down. 

“This is mainly due to the fact that an extraordinary number of homes were sold in July this year, which is why the increase in August sales seems a little smaller. In other words, this is a good sales result for August this year, which is close to the average sales for the same month in the years before corona,” she said in a statement.

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The number of detached and semi-detached houses sold fell 1.8 percent from July to August, with falls in Southern Denmark and Zealand only partly compensated by a rise in the number of house sales in Central Jutland, Greater Copenhagen and North Jutland. 

“It is not unusual that the housing market is slightly more affected by the summer holiday break compared to the other housing types, because it is often families with children who buy a house, where the majority of them are on holiday at the same time as the school summer holidays, which continue into August,”  Daetz explained.

“However, despite the summer holidays, this year’s August sales of houses exceed the average sales for the month in the years before corona in the vast majority of the country, which shows that house sales are still at a good level.”

The number of summer houses sold soared by 13.6 percent between July and August, with owners presumably waiting until the end of their summer holidays before finalising sales. 

Sales of owner-occupied apartments were also strong, rising 5.8 percent between July and August, and as much as 9.5 percent in Copenhagen, something Daetz said continued an established trend. 

“For a relatively long time, we have seen growth in the market for owner-occupied flats, with increasing commercial activity and higher sales prices. It is a surprising development, which has occurred despite the fact that property taxes have in many cases increased for owner-occupied flats – especially in the capital,” Daetz said.

Even after this year’s rebound, however, the Danish housing market is still 20 percent slower than it was in the years running of to the Covid-19 pandemic and the following period of high inflation. 

“Even though the apartment market seems to be hot at the moment, sales are still lagging behind compared to the average August sales in the years before corona by 20 percent,” Daetz said. 

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