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Everything you need to know is included in our Denmark Property Pack
Are you considering buying real estate in the land of Vikings? Are you questioning if it's a good idea to buy now or if it's better to wait until next year?
People have differing viewpoints when it comes to market timing. The Danish real estate agent you know might advise you that now is the opportune time to buy property, while your childhood friend from Copenhagen may suggest exercising more patience before making a decision.
At Investropa, when we create articles or update our pack of documents related to the real estate market in Denmark, we trust facts and data, not opinions or rumors.
We have collected and examined all the official reports and statistics from government websites. Based on this extensive research, we have compiled a complete and reliable database. Here's what we discovered, which can assist you in deciding whether now is the right time to purchase real estate in Denmark.
Enjoy the article!
How is the property market in Denmark now?
Denmark is, today, one of the most stable countries in the world
Positive
Stability should be the leading criterion when choosing a country for real estate investments. It is an information you need as a foreigner looking to buy real estate in Denmark.
You probably already know that Denmark is incredibly stable. The last Fragile State Index reported for this country is 18.1, which extremely high.
Denmark has a well-developed welfare state, with generous social benefits and a strong emphasis on social equality, which helps to ensure social stability. Additionally, Denmark has a strong and stable economy, with low public debt and high levels of foreign investment, which helps to ensure economic stability.
Investors can definitely rely on the country's stability for investment. Let's review the economic outlook.
Denmark will grow at a moderate pace
Positive
Evaluate the country's economic condition before deciding to invest in property.
As projected by the IMF, Denmark will, in 2023, grow by 1%, which is positive. As for 2024, the consensus estimate is 1%.
This steady growth might keep going since Denmark's economy is expected to increase by 6% during the next 5 years, resulting in an average GDP growth rate of 1.2%.
The minimal growth rate in Denmark can make investing in property challenging, as it suggests that any returns on investment will be low. This means that there is a greater risk of not seeing a return on the investment, or a return that is much lower than expected.
On top of that, there are other indicators to pay attention to.
Danish business owners have a neutral outlook towards market conditions
Neutral
The GDP forecast is not enough to fully capture the local sentiment, as it relies solely on external projections and may overlook important factors. Thankfully, in Denmark there is an official metric that is frequently communicated. We're lucky because this isn't true for every country.
The Business Consumer Index (BCI) is a measurement that captures the confidence of business leaders in both the current and future economic conditions. Surveys and assessments are utilized to determine this index.
According to the Statistics Denmark's data, the latest Business Confidence Index value is -3 for Denmark. It is definitely a small score.
There hasn't been significant change, considering that the BCI score, 12 months ago, registered at 0.
In Denmark, Business Confidence is currently not at its highest level. However, this does not mean that the property market will inevitably crash. A lower confidence score often signifies a temporary phase of uncertainty or caution within the business sector, which is a normal occurrence in economic cycles.
Therefore, it is important to assess other key indicators before determining whether it is the right time to purchase property in Denmark. Good news, we have more for you.
Denmark’s property market: growth, stability, and price decline
Positive
Denmark's home prices have increased by 17.0% in 5 years according to eurostat.
It means that if you had bought an apartment in Copenhagen for $500,000 five years ago, then it would now be worth around $585,000.
Recently, the property market has witnessed a transition from a period of growth to stability, followed by a decline in prices.
The drop we're seeing in property prices in Denmark is not necessarily a negative signal. Instead, it could indicate a market correction that presents an opportunity to invest in Danish properties at discounted prices.
You can find a more detailed analysis of the real estate prices in our property pack for Denmark.
Everything you need to know is included in our Denmark Property Pack
Denmark's population is getting richer
Positive
Take population growth and GDP per capita into consideration before you decide to invest in real estate because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Denmark, the average GDP per capita has changed by 6.3% over the last 5 years. It's a solid number.
This means that, if you purchase a modern apartment in Copenhagen and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, the demand for rentals is predicted to increase in Danish cities such as Copenhagen, Aarhus, or Odense in 2024.
Rental yields are not crazy in Denmark
Neutral
Let's now turn our attention to the rental yield.
It's the annual rental income of a property divided by its price. For example, if a property in Denmark is purchased for 2,000,000 DKK and generates 100,000 DKK in annual rental income, the rental yield would be 5%.
According to Numbeo, rental properties in Denmark offer gross rental yields ranging from 2.9% and 5.6%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Denmark.
It means that the income potential from a real estate investment is relatively moderate.
Everything you need to know is included in our Denmark Property Pack
In Denmark, inflation is projected to remain moderate
Neutral
In two words, inflation is when money devalues.
It's when your favorite cup of Danish coffee in Copenhagen costs 30 Danish kroner instead of 25 Danish kroner a couple of years ago.
If you're about to invest in a property, high inflation can benefit you:
- property values tend to increase over time, leading to potential capital appreciation
- inflation can result in higher rental rates, increasing cash flow from the property
- inflation reduces the real value of debt, making mortgage payments more affordable
- real estate can act as a hedge against inflation, preserving the value of the investment
- diversifying into real estate provides stability during inflationary periods
- tax advantages, like depreciation deductions, can help offset the impact of inflation
As per the IMF's forecasts, over the next 5 years, Denmark will have an inflation rate of 12.3%, which gives us an average yearly increase of 2.5%.
This data means that Denmark might experience inflation soon, so it's worth thinking about buying property now.
Is it a good time to buy real estate in Denmark then?
Time to conclude !
2024 offers a promising prospect for property investment in Denmark, supported by a range of positive indicators that enhance the investment environment. Denmark's remarkable stability and anticipated moderate economic growth provide a secure foundation for potential investors. The combination of growth, stability, and recent price decline in the property market presents an enticing opportunity, suggesting potential for both long-term value appreciation and stable investment.
Furthermore, the increasing prosperity of Denmark's population complements the investment landscape, indicating potential for a growing demand for housing. While some neutral aspects, such as the neutral outlook of Danish business owners and rental yields, should be noted, Denmark's stable economic environment helps mitigate potential uncertainties.
The projection of moderate inflation aligns with the overall stable investment conditions, offering a level of predictability for potential property buyers. While some aspects may not be extraordinary, such as rental yields, the balanced combination of favorable, neutral, and moderate inflation signals contributes to a positive investment environment.
In summary, the confluence of Denmark's stability, moderate growth, property market dynamics, and increasing prosperity creates an appealing backdrop for property investment in 2024. Despite neutral elements, the overall stability and potential for property value growth position Denmark as an attractive destination for investors seeking stable and potentially rewarding real estate opportunities.
We genuinely hope this article has provided you with helpful information.. If you need to know more, you can check our our pack of documents related to the real estate market in Denmark.
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This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.
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