Leading executives Peter Winther and Carsten Gørtz Petersen today launched Colliers’ annualmarket report, a full 175-page market update– heralding mainly good news and bright prospects for the future.
Momentum is strong in the Danish property market. This was the message at an online and live launch of Colliers’ Copenhagen Property Market Report 2021, with intermittent live reports from the United States and major growth centres outside Copenhagen and Aarhus.
From Colliers’ new Danish head office at Toldbodgade in Copenhagen, CEO Peter Wintherre ported that total return on Greater Copenhagen property investments was 9.9% in 2020, that is, almost matching the level of 11.8% seen in 2018.
This means that property returns greatly outperformed bond returns, but were topped by returns on stocks, hitting a renewed historical high in 2020. Average income return on property investments was 4.1% and capital growth was 5.8%, significantly exceeding an unprecedented low inflation rate.
“Capital gains were driven largely by yield compression. If breaking down aggregate capital growth of 5.8%, rental growth accounted for 0.4% percentage points while 5.4 percentage points were attributable to a decline in investors’ net initial yield requirements on property investments. Moreover, capital gains were slightly impaired by an uptick in vacancy rates. Unlike 2018 and 2019, property price increases were therefore not driven by favourable trends in the occupational market”, explained Peter Winther.
Carsten Gørtz Petersen, Partner and Director of Colliers’ Aarhus office, proceeded to comment on the state of the residential market, which may currently be described as “fairly hot”:
“Residential newbuilding activity is really brisk, which is good news for prospective residents as this improved supply and demand balance makes it easier for them to settle exactly where they like. However, there are signs to suggest that newbuilding fails to match demand. This is likely to drive up residential vacancy rates”.
As examples, Carsten Gørtz Petersen cited the prolonged re-letting periods associated with large residential units of more than 99 m, along with the fact that rental prices of new units have dropped by 2% on average over the past four years. In the same period, the rent commanded by units smaller than 75 m has increased by 15%.
New growth centres coming into focus
This year’s market report has further sharpened the focus on growth centres outside Copenhagen. Whereas 70% of property investments took place in Greater Copenhagen in 2019, 2020 saw an even distribution between Greater Copenhagen and the rest of Denmark.
Demand is driven also by the great number of international investors active in Aarhus, Aalborg, the Triangle Region and Odense. Colliers is represented in all these local markets.
At the market report launch, Peter Winther also touched on some of the future trends envisaged by Colliers: Increased newbuilding, stronger transaction activity and an ever-growing international investor presence in Denmark. And he also urged calm,
“2021 will be a good year; the crisis will not hit in 2022 either, perhaps not even in 2023. But true crises are not caused by pandemics, severe winters or other exogeneous shocks. They are caused by excessive imbalances in the economy and the markets. And little by little, the precursors to the next crisis are developing”, Peter Winther says in closing.