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Why Property Investors Are Going Nordic

COVID-19 has led to rising house prices throughout the Nordic region

New research from Danske Bank shows that house prices have risen across the Nordic region despite the pandemic and economic uncertainty.
Danes have not been the only ones active in the housing market during the corona crisis. Our Nordic neighbours have also been on the hunt for new houses, apartments, and vacation homes, and that has resulted in substantial price increases in Denmark, Sweden, Norway, and Finland.
Denmark and Sweden top the league in terms of price growth, while Finland has experienced more modest price rises.

In the case of Sweden, the increase comes in an already very expensive market. Prices here have risen by 18 per cent, on average, between December 2019 and April 2021. In Denmark, prices had increased by 15.7 per cent, 17.9 per cent and 26.4 per cent on houses, apartments and vacation homes, respectively, when measured in May. In Norway, prices were up 11.4 per cent in May 2021 compared with May 2020, while Finland saw more limited increases, with square metre prices growing 4.9 per cent.

Unusual development

Common to all the Nordic countries is a growing interest in larger homes due to the lockdowns, though greater purchasing power as a result of low-interest rates also plays a role. Yet, prices rising so dramatically was a surprise.

Pronounced price increases during a time of great economic uncertainty is a very unusual trend. This was the case for all four countries, as buying a home was high on the agenda across Denmark, Norway, Sweden, and Finland. Naturally, there are regional differences, but the overall picture is of a red-hot Nordic housing market.

While prices have risen very substantially, Danske Bank’s research also shows there is still room for first-time buyers in several of the Nordic countries, though they will probably have to look for a home outside the capital cities. In Denmark, the so-called housing burden is low in historical terms, while Sweden, too, offers better opportunities for first-time buyers – if they plan to live outside the three largest cities, that is.

Why Invest in Danish Real Estate?

  • Low transaction costs
  • High degree of market transparency and stability
  • Low financing rates through Danish mortgage credit institutions
  • Solid key economic indicators
  • AAA/A-1+ credit rating and stable outlook*

Low Transaction Costs

As buyer:

  • Deed registration: 0.6% of purchase price + € 190
  • Mortgage: 1.5% of the mortgage’s principal +€ 190
  • Costs for own advisor, lawyer, agent etc. are typically very low

As seller:

  • Agent, lawyer etc. varies, but typically between
  • 1 – 4% of purchase price depending on deal size
  • Denmark is known to have some of the lowest roundtrip property transactions costs

Low financing rates

  • Low origination costs
  • Low APR compared to the majority of European markets
  • Highly transparent, stable and liquid mortgage bond market
  • Flexible loans on conditions close to funding conditions of capital market players
  • Low financing rate: Bond yield plus a small markup (margin) for the mortgage bank
  • Debt/value ratio: Financing through the mortgage institutions, normally up to 60% of valuation
  • Loan maturity: Min. 1 year (yearly refinancing), max. 20 years
  • Payment structure: Floating or fixed rates, with or without quarterly principal repayments
  • Each new loan is in principle funded by the issuance of new mortgage bonds of equal size and identical cash flow and maturity characteristics, called the Balance Principle. Proceeds from the sale of the bonds are passed on to the borrower and similarly, interest and principal payments are passed directly to investors holding mortgage bonds
  • The Danish mortgage institutions have existed since 1850 and are considered very strong and very low risk financial instruments
  • In terms of volume outstanding, Denmark has the second largest share of the mortgage bond market in Europe
  • There has never been an incidence of default on a Danish mortgage bond

High Degree of Transparency

  • Denmark is among the most transparent markets in Europe and worldwide. The transparent Danish market provides the investor with a secure and low risk environment for foreign direct investment
  • Investments in Denmark are conducted in a market which benefits from a highly transparent and stable legal and regulatory framework coupled with a simple transaction process

Lease Structure

  • Rent adjustment, normally adjusted yearly with the rate of inflation or a fixed minimum rate
  • Rent review every fourth year. Terms are flexible
  • It is possible to agree on a threshold for the rent. eg. the rent cannot drop further than the rent in force at the start of the tenancy
  • The landlord and the tenant can freely agree on the rent amount as long as the rent is not unreasonable or contrary to sound business practices
  • Lease length: There are no statutory restrictions on the duration of a commercial lease agreement. It is normal to have interminable leases in place

Marketing & due diligence

We provide you with marketing research in general or a specific product and conduct due diligence for your successful investment.

Investing in Denmark gives you an opportunity to get a residence permit in Denmark.