Fizzy, Not Bubbly: Denmark Rules out Housing Market Intervention

Denmark has no plans to intervene in the housing market just yet, since surging prices aren’t about to cause a property bubble, Business Minister Troels Lund Poulsen says.

Apartment prices in Copenhagen have jumped 11 percent in the 12 month through June, according to Denmark’s statistics office, with prices in the center of the Danish capital now up 63 percent from their low six years ago.

Nationwide, prices for flats are now back to the levels they hit before the last property bubble burst, in 2008.

Concerned that the latest price increases may lead to a speculative vicious circle, Denmark’s central bank earlier this month invited lenders to require borrowers to increase their minimum down payments. The current guidelines point to a minimum of 5 percent of the value of the property. 

Denmark’s biggest lender, Danske Bank A/S, warned in July that the Danish capital is fast becoming Scandinavia’s riskiest property market as low interest rates spur home-buyers to ask for bigger loans.

But while both the government and the central bank expect property prices to continue their upward run as the economy picks up, Poulsen says there is no need to act just yet.

“It’s clear that some of the price swings we see in Copenhagen are very big,” Poulsen told Bloomberg in an interview at his office next to the parliament on Friday. But “I don’t think there’s anything to indicate that we’re looking at a bubble here and now.” 

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