Colliers Copenhagen Property Market Report 2019

Investing in Denmark – Market Report 2019

14

Danske Bank does not expect the end of the programme to trigger any rate hikes by the ECB or Danmarks Nationalbank before December 2019 at the earliest, although long-term interest rates are predicted to increase, picking up pace as the above-mentioned rate hikes draw nearer. In 2018, the Danish benchmark yield, defined as the yield on a 10-year government bond, edged down marginally from 0.48% to 0.47%. By comparison, the short-term interest rate dropped from -0.27% to -0.30%. Political stability Denmark is consistently named one of the least corrupt countries in the world according to 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 and reforms only rarely being reversed in case of change of govern- ment. Denmark has a multi-party system comprising a relatively large number of parties in the Danish Parliament, with the four oldest and largest political parties typically obtaining a high proportion of votes (54% combined in the latest general election (2015)). This emphasises the strong element of continuity in Danish politics. Property transaction volume at DKK 71bn in 2018 Transaction volume in the Danish investment property market totalled DKK 71bn in 2018. Compared to the all-time high of 2017, this corresponds to a decline of 19%, ending a 7-year period of unbroken growth. The decline in transaction volume is not due to lack of investor demand but rather to a mismatch between sell-side and buy-side price expectations. Misguided by recent years’ rallying investment property prices, prospective sellers continue to factor in strong hikes in pricing expectations. The mismatch is most pronounced in the market for new residen- tial rental properties in prime locations in Greater Copenhagen and Aarhus (Denmark’s second largest city). In addition, uncertainty is building in the Danish residential property market as brisk newbuilding activity in the largest cities of Denmark, including Copenhagen, Aarhus, Aalborg and Odense, is raising concerns of an oversupply in the short to medium term. In addition, mortgage banks are adopting a slightly tighter lending policy in terms of commercial property financing, including development schemes. For the past four years, residential property transactions have accounted for the largest share of total investment volume, in 2018 approximately 47%, while office property transactions accounted for approximately 27% and retail property transactions for approximately 11%. The low corruption rate and general transparency of Danish society contribute to Denmark’s strong brand value.

Danish framework conditions are strong, supported by a political system characterised by stability and consensus