Photographer: Freya Ingrid Morales/Bloomberg

Denmark Nears a Housing-Crisis Milestone as Deals Test 2006 High

Danes are buying and selling homes at the fastest pace since 2006, when the frenetic pace of deals was followed by the worst property market crash in a generation.

This time, historically low interest rates rather than speculation are fueling the development, Denmark’s Systemic Risk Council said on Wednesday. The government is already tightening mortgage lending guidelines, but more may be needed, it said.

Danske Bank’s mortgage unit estimates that seasonally adjusted property transactions rose 20 percent in the first quarter from a year earlier. Deals are up 6 percent from the fourth quarter, according to the bank.

After half a decade of negative interest rates, Denmark’s property market is booming. Though house prices are still about 5 percent below their 2007 peak, apartments cost on average 11 percent more than the record level reached just before the housing bubble burst almost a decade ago.

The International Monetary Fund this month singled out risks in the housing market in an Article IV consultation report on Denmark. “Continued house price rises would further increase households’ exposure to shocks, including from rising interest rates,” it said on June 20. It welcomed government efforts to curb mortgage lending. (The business ministry on June 19 called on mortgage banks to rein in lending to highly indebted families in Copenhagen and Aarhus who rely on interest-only or variable-rate loans.)

Data compiled by Denmark’s Systemic Risk Council suggest that “there continues to be a buildup of risks in the Copenhagen area,” it said.

“Market participants still expect very low rates for a long period, both in Denmark and Europe,” it said.

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