Newsletter_Q2_2018_UK

Newsletter Q2 2018

The housing burden may grow even heavier

with the trends seen in other major European cities, where the propensity to pay is higher. It is therefore not unlikely that Copenhageners have to get used to paying even more to live in a central location. In addition, it is feasible that the average minimum size requirement of 95 sqm will be eased so as to increase the supply of small-sized dwellings. The development of such smaller units is a popular measure in cities such as London and Amsterdam, where it is possible to develop flats that are as small as 40 sqm (so-called micro-housing). The call for a differentiated supply of flat sizes in Copenhagen is not only supported by price trends in the housing market but also by the fact that 44% of Copenhagen households are single-person house- holds. Despite an increasing number of Copen- hagen families with young children, small house- holds will continue to account for a substantial share of the rental market in particular. Moreover, because of demographic changes an increasing number of senior citizens will demand up-to-date, small flats in the city.

Recent years have seen a surge in purchasing power in Copenhagen. This is to a large extent an explana- tory variable driving price movements. Disposable income levels have increased by approximately 33% since 2007, and the wage gap between Copenhagen and the rest of Denmark is expected to gradu- ally widen as more families decide to stay living in the city and the ranks of long-cycle graduates are attracted by an increasingly knowledge-based job market. However, the rate of increase is expected to slow to a more moderate pace. Consequently, any major rent hikes will inevitably occur at the expense of heavier housing burdens. Today, we already see many income groups sett- ling for substantial compromises, trading off both housing area and excess income after housing costs for housing in a relatively central Greater Copen- hagen location. Housing is increasingly evolving into a high priority concern and considered a luxury benefit that many are willing to pay more for. As a result, we expect that the housing burden may potentially grow even heavier in future. This tallies

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