Denmark’s housing market exceeds expectations, says watchdog

HOME prices in Denmark will drop significantly less this year than previously forecast, according to the state’s fiscal watchdog, suggesting the Nordic country will avoid the real estate crisis seen in neighbouring Sweden.

Prices will decline by just 2.5 per cent, the Economic Councils said in a report on Tuesday (Oct 10), having estimated in May a decrease of 8 per cent. It is less pessimistic than other official forecasts on Denmark’s 2023 housing market, with the government predicting a 4.5 per cent drop while the central bank estimates a 3.2 per cent decrease.

Rising prices during the summer will continue for the rest of the year, offsetting some of the downturn seen early in 2023, according to the new forecast. Record-high employment, rising wages and slowing inflation are cushioning the housing market, the Economic Councils, also dubbed the “wise men”, said. They also raised their gross domestic product estimate for the year to 1.7 per cent from 1 per cent.

The Danish property market as such appears to have steered clear of the real estate turmoil seen in Sweden, where plunging prices have squeezed commercial landlords and worries over the market have depressed the Swedish krona. Still, Denmark’s Systemic Risk Council last week warned that banks’ commercial real estate portfolios could spark losses that are significantly larger than historical models can measure, and suggested they hold more capital to protect their exposures.

An upcoming tax reform may have prompted some temporary high activity on the Danish housing market ahead of it taking effect next year, the report said. While the reform could drive price declines in pockets of the housing market in 2024, the Economic Councils still anticipates overall positive growth of 1 per cent, rather than a 1 per cent decline seen in May. Prices are expected to go up by 3.8 per cent in 2025. BLOOMBERG