● THE DANISH PROPERTY MARKET NEWSEC PROPERTY OUTLOOK • SPRING 2022
THE DANISH PROPERTY MARKET The Danish economy continues to expand. In Q4 2021, GDP was 3% above the pre-pandemic level and it is estimated to have grown by 3.9% in 2021. The economy is expected to grow by 2.8% in 2022. So far, businesses have, in general, made it through the pandemic relatively well and business confidence remains positive in most industries. Private consumption has increased substantially since the reopening of society in the spring of 2021 and is expected to grow rapidly in 2022 as well. Danish households have resumed their consumption to the usual extent at the end of 2021. Incomes and wages are expected to continue to grow, and households are likely to reduce the propensity to save in coming years. The composition of consumption is still distorted, with goods making up a larger share than normal and services making up a smaller share. In its latest forecast, the Ministry of Finance expects consumption to gradually approach its “normal” composition from before the COVID-19 crisis. Employment skyrocketed throughout 2021 to new record levels. From January to November the number of employees increased by 154,000. This is significantly more than previously expected. Employment has risen in most industries. Unemployment has dropped to 2.5% and there is a widespread shortage of labor. The labour market is reflecting a booming economy with increasing pressure on the economy's available resources. Inflation accelerated to more than 3% in Q4 2021, mainly due to the sharply rising energy prices. Consumer prices rose by 1.9% on an annual basis in 2021. Inflation is expected to climb to 2.2% in 2022 despite forecast
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THE PROPERTY MARKET RIDES THE WAVE OF A FLOURISHING ECONOMY
declining energy prices. This is due to the increasing utilisation of capacity in the economy. Rising inflation is affecting interest rates. The 10-year Danish government bond yield has risen from -0.5% at the beginning of 2021 to -0.2% at the beginning of 2022. However, there were significant fluctuations with interest rates tending to fall with new outbreaks of COVID-19 and surges in infection rates. Nevertheless, interest rates are still low and the Ministry of Finance forecasts this to continue in 2022. Based on market expectations, the average yield on a 10-year government bond in 2022 is expected to stay negative at around -0.1%. Thus, real interest rates will remain very low. The property transaction volume reached a record level of DKK 98 billion in 2021 - up by 37% compared to 2020. The growth was mainly driven by strong demand for residential properties. Investment in residential assets reached DKK 53 billion making it, by far, the most transacted property
type. Investment in industrial and logistic properties also contributed significantly to investment growth, almost doubled from DKK 6.6 billion in 2020 to DKK 12.4 billion in 2021 – also a record high. Investment was to a great extend driven by foreign investors. Overall, they represented 60% of the transaction volume. Foreign buyers were especially targeting industrial & logistic assets (74% share) and residential properties (63% share). The outlook for 2022 is continued strong investment activity. Momentum from 2021 has continued into 2022 with a number of large transactions in January and a favorable macroeconomic environment going forward with high economic growth, low (albeit moderately rising) interest rates, ample access to capital and positive attention from foreign investors.
Contact: Robin Rich robin.rich @newsec.dk
