Thursday, January 24, 2013
The latest IMF’s report on Denmark says that:
The Danish housing market continued its decline through 2011 and the first half of 2012, despite a short respite in 2010. Real house prices have fallen by 26 percent since their peak in 2007Q1, after a two-year period in which prices rose by over 60 percent. Housing starts declined by 17 percent in 2011, and by 28 percent in the first half of 2012 relative to the first six months of 2011. Year-on-year prices for the residential properties fell by 5–6 percent in 2012 Q2.
Indicators of house price misalignment are mixed. The price-to-income ratio and price-to-rent ratio remain above their 1970–2010 historical averages but by less than one standard deviation (0.7 and 0.9 respectively).
The housing market remains vulnerable. Mortgage loans with variable rates and deferred amortization loans (interest-only for 10 years) account for 74 and 56 percent of the mortgages respectively. Given the high debt levels of Danish households, this creates a threat of higher delinquencies should rates rise or incomes fall.
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