MR 2018

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Copenhagen Property Market Report 2018

Low interest rates and low inflation The DKK-EUR peg ties the interest rates determined by the Danish central bank, Danmarks Nationalbank, to those of the ECB. In view of Denmark’s large current account surplus and the strong demand for Danish government bonds, it is plausible that Danish interest rate levels will remain lower than those of the ECB for a significant length of time, even when the ECB scales down its bond purchase programme in 2018. Danske Bank does not foresee any Danish rate hikes until the ECB raises its rates. However, Danske Bank expects moderate increases in long-term interest rates before 2019 in the eurozone as well as in Denmark. In 2017, the Danish benchmark yield, defined as the yield on a 10-year government bond, increased from 0.30% to 0.49%. By comparison, the short-term interest rate dropped from -0.24% to -0.31%. Political stability In 2016, Denmark topped the list of the world’s least corrupt countries for the fourth year in a row in the annual ‘Corruption Perceptions Index’, ranking countries based on several factors, including public sector corruption and transparency in politics. The political system in Denmark is characterised by stability and consensus, with major political agreements only rarely being reversed in case of change of government. In the latest general election (2015), the four oldest parties – dating back to 1870-1916 – altogether obtained 54% of votes, emphasising the strong element of continuity in Danish politics. Property transaction volume at DKK 88bn in 2017 Transaction volume in the Danish investment property market totalled DKK 88bn in 2017, marking an all-time high and a strong 39% increase relative to the pre-crisis volume of DKK 66bn recorded in 2006. For the third consecutive year, investments in residential properties accounted for the largest share of total investment volume, namely 45%, whereas office and retail property investments each accounted for around 20%. Transaction activity in the market for industrial property has picked up substantially compared to 2016, driven mainly by Blackstone’s acquisition of a secondary industrial portfolio from M7 Real Estate. International investors accounted for 54% International investors have consolidated their positions in the Danish investment property market: In terms of volume, they were involved in around 54% of overall property investments in 2017, up from 45% in 2016. The predominance of international investors is more evident in the segment involving transactions with a volume in excess of DKK 500m, in which they account for more than 68% of transaction volume. International investors such as Heimstaden, Niam, Blackstone and Patrizia have been The low corruption rate and general transparency of Danish society contribute to the strong brand value of Denmark.

In 2016, Denmark topped the list of the world’s least corrupt countries for the fourth year in a row in the annual “Corruption Perceptions Index”, ranking countries based on several factors, including public sector corruption and transparency in politics.