● THE DANISH PROPERTY MARKET NEWSEC PROPERTY OUTLOOK • SPRING 2020
THE DANISH PROPERTY MARKET THE TRANSACTION MARKET REMAINS HEALTHY
The Danish real estate market in general came off to a slow start in 2019, which turned into a sprint with many large transactions in the fourth quarter. Interest rates did not rise as was initially forecast, and the low interest climate is now instead expected to persist over the coming years. This, together with plenty of liquidity in the market, catalyzed the transaction volume in the second half of 2019. The last quarter saw a strong volume of around DKK 21 billion, with the total volume exceeding DKK 55 billon. Despite DKK 55 billion being a decrease compared to 2018’s level of DKK 74 billion, the level is still high and the hesitation at the beginning of the year can be seen as a sign of a healthy market, where investors critically question the risk-inducing elements. In a market characterized by a high degree of capital allocation towards real estate investment, all else being equal, the volume of transactions is
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2019 was a reasonably strong year for the Danish economy, with a growth rate of around 2.0 per cent. In September, the key deposit rate was lowered by ten basis points to -0.75 per cent, following a move by the European Central Bank to lower rates. Despite this, Danish fundamentals remain strong, although the currency peg to the euro has become increasingly difficult to maintain. 2019 was also a year in which a lot of political debate related to the residential property market occurred. The debate was mainly related to the rental level in Copenhagen and the different factors impacting this, such as the renovation option in paragraph 5.2 of the Rental Regulation Act. This has impacted the real estate market, causing a drop in the transaction volume of the older stock equal to around 70 per cent.
expected to be high. The challenge, however, is that sellers have limited alternative investment opportunities, which inflates seller expectations and causes yield compression on the market. Nevertheless, a strong transac-
tion volume of around DKK 65 billion is expected in 2020. Contact: Niels Juul Belling niels.belling@newsec.dk
