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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.

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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PROPERTY

Why Danish house prices have climbed to ‘Covid-era levels’

A consistent upwards trend in house prices in Denmark in recent months has seen properties reach their highest values since the middle of 2022.

Why Danish house prices have climbed to ‘Covid-era levels’

The Covid-19-hit years of 2020 and 2021 saw house prices saw in Denmark before a cooling-off period which began in 2022, but property prices have begun to recover towards the previously high levels, real estate site Boligsiden reports.

Data from estate agents collated by the media show the trend of rising prises.

House prices increased by 1.2 percent between April and May with both detached and semi-detached houses having gone up every month this year.

That has brought the average house price in Denmark to its highest level since September 2022.

“Overall we have today a housing market which is doing well and is in better shape than many of us expected,” Boligsiden’s director and real estate economist Birgit Daetz told news wire Ritzau.

A primary reason for the trend is a stable financial situation in many Danish households, she explained.

High employment, salary increases related to inflation, and savings levels are all relevant factors.

“Additionally, interest rates were recently cut and that will have a positive effect on the property market, all else being equal,” Daetz said.

“This is why the expectation is also for house prices to increase further in the coming period,” she said.

READ ALSO: How Danish mortgages could be affected by ECB interest rate cut

In contrast to houses, apartments have seen a more restrained price trend, in part due to the impact of new property taxes on valuations.

Nevertheless, apartments also saw a 0.5 percent increase in average price between April and May.

“The apartment market has surprised us recently because it has had the biggest property tax increases. That’s why the expectation was that prices would fall as a result,” Daetz said.

“But in the last few months we have also seen increasing trades and prices on apartments. The relatively low supply also plays a role here because there seems to be demand for the few apartments that go on the market,” she said.

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

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