In the third quarter of 2018, property prices in Copenhagen have fallen as supply has surpassed demand. Now there might be new hope as we take a look at the development in the other Scandinavian capitals.

Property prices in Norway and Sweden have started to show positive development after a year with declining property prices in the two Scandinavian capitals. Both Norway and Sweden implemented tightening of loans in 2017 after prices rose significantly in the period from 2014 – 2017. The tightenings led to falling property prices in both countries.

Copenhagen has seen a decline in property prices the last three months after the government last year tightened the access to risky property loans. The government tightened the access in order to avoid a property bubble like the one we saw at the end of the 2000´s.

Looking at the development in Norway and Sweden a year after the tightenings, prices are now starting to show uprising again. According to analysts in Norway and Sweden, the renewed optimism is caused by people’s ability to adjust to the new tightenings so that they will have economic space in case the interest rate would rise. Also, the insecurity we saw amongst buyers right after the tightenings, have been much smaller.

When following this development in Oslo and Stockholm, it is worth noticing that the current price decline in Copenhagen has not been as significant as we have seen in the two other Scandinavian capitals.

The question is, will the property market in Copenhagen react as it did in Oslo and Stockholm. This depends on the sales numbers for the following months and how the new property tax and property assessments will work out.

An important factor is the interest rate – a rate that has been very low in both Denmark, Norway and Sweden for some time now.

In September, Norges Bank raised interest rates for the first time in seven years by 0.25 percentage points to 0.75%, and it is expected that it will rise to 4% over the next three years.

Since Denmark have implemented tightenings on loans, one year later than Norway and Sweden, with low rates since 2015 – a rise in interest rates in Denmark, is just a matter of time. Higher rates mean more expensive loans which will keep some potential buyers out of the market and thereby slow down a potential growth in prices.

The property market in Copenhagen is very similar to those in Stockholm and Oslo with regards to price development, growth in inhabitants and thereby the demand for properties – there is, therefore, a chance that the market in Copenhagen will react as it did in Oslo and Stockholm within the next 12 months.

Graph source: boligsiden.dk

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