Apartment prices rise and rise

The cost of apartments have risen steadily over the past year but still remain almost 20 percent lower than the August 2006 high

June marked the 12th straight month in which flat prices rose, with the highest price increases taking place in Copenhagen and central Jutland.

According to the Holmes price index, the price of apartments across the country rose by 1.5 percent between May and June, resulting in prices 14.7 percent higher than the year before.

Prices in Copenhagen have been rising even faster, however, and are 17.8 percent higher this June than the year before.

According to Danske Bank economist Jens Bærvig Pedersen, the upward trend is a result of several factors.

“The first is the low level of supply that helps push up prices,” Pedersen told Jyllands-Posten newspaper. “Interest rates are low which encourages people to look at purchasing flats and I think there has also been a developing latent demand among Danes.”

He added: “There is a large number of people standing on the sidelines and waiting to enter the market when the time was right. People stayed away because of the high economic uncertainty but the uncertainty has started to ebb away.”

The arrival of summer also marks the start of the hunt for student accommodation in Copenhagen, Odense, Aarhus and Aalborg which also pushes up prices.

According to Pedersen, increasing numbers of parents are buying apartments for their children, a practice dubbed forældrekøb.

“It is a more sensible investment now than it was a year ago, especially if prices continue to rise, which there is reason to believe they will.”

An average 85sqm apartment now costs around 1,760,000 kroner which is 18.6 percent less than the high achieved in August 2006 when the same apartment would have cost 2,170,000 kroner.

The dramatic price increases over the past few years have lead several economists to fear that a new housing bubble is forming. Pedersen, however, is not concerned.

“The prices have been rising quickly, but you need to remember that the increases are coming from a very low base level so I see it more as a correction to a price level that was set too low,” Pedersen said. “The expectation is that prices will continue to rise but that the tempo will ease off.”