Housing prices falling, falling, falling

Sales prices on flats stir, but analysts foresee a continued softening in the hard-hit housing market

Life signs glimmered in the market for owner-occupied flats (ejerlejligheder) and summerhouses in October and November 2011, when average sales prices increased by 1.3 percent.

It was a slim improvement, but an improvement nonetheless in a year that saw dramatic losses in the housing market.

The bit of good news was clouded, however, by a continued decline in the average sales price for single family homes, which dropped by 2.1 percent in the same period, according to Danmarks Statistik.

On the whole, 2011 was bearish for the housing market. Sharp price declines were the rule, with prices for single family houses dropping by 8.5 percent on average, while prices for owner-occupied flats and summerhouses fell by 3.5 percent and 6.9 percent, respectively.

“It’s really worrisome that housing prices have fallen by as much as they have,” said Danske Bank chief economist Steen Bocian, noting a few reasons for the trend.

“First off, there is no doubt that the European debt crisis has made Danes more anxious. A housing purchase is a long-term investment and when there is a lot of economic insecurity buyers tend to shy away,” he said.

“On top of that, the election in the middle of September raised insecurities about the housing market, because both political factions were promising tax breaks for homeowners in connection with buying or selling a property – but nothing came of it after the election,” Bocian added.

He predicted that the price drops would taper off in the course of 2012, once the historically low interest rates – banks began offering 30-year fixed-rate mortgages for 3.5 percent in January – begin to seduce otherwise skittish buyers.

Realkreditrådet, the association of Danish mortgage banks, remarked that sellers’ and buyers’ expectations had diverged, making it even more difficult to close deals.

“Over the past couple of years the asking price on a typical house has dropped by approximately 90,000 kroner. But those asking prices ought to be slashed by another 90,000 kroner to match actual market prices,” said Ane Arnth Jensen, managing director of Realkreditrådet.

She added that the average homeowner trying to sell a single-family house today must lower their initial asking price by 14 percent, before a buyer will bite.

Housing prices on average have dropped by 21.4 percent since the height of the housing bubble in May 2007.




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