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Spots of bright lights in the troublesome and gloomy Danish housing market

Monday, 07 January 2013
The Danish housing market has continues to hold the economy down and that attitude has persisted. However, there are slight indications that things may be changing for a better.

Since the peak period of 2007 - 2008, Danish house prices shifted down and fallen by an average of 20 percent. It looks like 2012 blew some warm air over the Danish housing sector as prices seem to have jolted a bit. Now economists are beginning to feel that the Danish house prices could be returning to start pushing back the economy upward.

According to Danske Bank chief economist, Steen Bocian, there are some positive signs in the Copenhagen area, though the Danish house prices have not yet properly recovered. Looking at the past year, home prices have remained constant, but since the price peak in 2007, the value of Danish homes on average had fallen by 20 percent.

Steen Bocian, points to the low interest rates in Denmark with a policy rate of 0.2 percent as an explanation as to why house prices have now stabilized somewhat.
"When prices fell the most in 2009, the central bank raised interest rates to defend the Danish fixed exchange rate as investors fled the Danish krone. That damaged the housing market. Now the interest rate has rather than historical low which certainly favours the housing market, "said Steen Bocian.

The trend has been slightly brighter for apartments, where prices have risen by an average of 5 percent in 2012. Nevertheless, compared with the peak in 2007, the house prices are still down 19 percent.

Drawing a parallel with the Swedish housing market, the economist pointed that "Sweden house market has a different situation compared to Denmark, with price trends for homes more linked to people's incomes. The Danish price surge was a bubble that burst, with many investors owning double accommodation based on pure speculation. This behaviour has not been as common in Sweden, "said Steen Bocian.

However, he is concerned about the Swedish housing market, where he expects a price drop in Swedish homes in the coming years. However, the adjustment will probably be less dramatic than in Denmark, where there has not been the same degree of bubble in the Swedish house prices as on the Danish side.
By Scancomark.com Team

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