Norwegian property mogul eyes Copenhagen, as population growth pushes up prices
Restricted geography adds further pressure on Swedish capital Stockholm, but Nordic markets confident of handling ‘fairly drastic’ rate increases
Copenhagen’s “comparatively low” real estate prices should continue to rise as the city’s population grows, Norwegian investor Ivar Tollefsen, who owns properties in the Danish capital worth US$1.55 billion.
Tollefsen, whose wider Scandinavian property portfolio is valued at US$7.4 billion, has been snapping up houses and flats in Copenhagen since 2014. He said higher yields from residential rentals than in neighbouring countries was drawing strong interest from international investors.
“The economic fundamentals are good, and the population growth in Copenhagen will support rising rental values and market values,” Tollefsen said in an emailed response to questions from Reuters.
Copenhagen’s population has grown 23 per cent since 1995 and that pattern is set to continue, according to Denmark’s national statistics office.
Prices of owner-occupied flats in the city have risen around 10 per cent annually in recent years. Denmark’s largest mortgage lender Nykredit expects apartment prices to go up by 8.7 per cent this year, 4.9 per cent next year and 3.3 per cent in 2019.
The city’s geography means it can expand in several directions, however, easing some of the upwards pressure on property prices, said Tollefsen, who is also known for leading Arctic and Antarctic expeditions and rally-driving.
Oslo and Stockholm are more geographically restricted, with limited space for new buildings.
“We believe this puts higher pressure on property prices in Stockholm and Oslo,” he said.
Tollefsen said he still considered residential prices to be low in Copenhagen compared to other Nordic and larger European cities. He said he believed property values would grow in line with or slightly more than salaries over a number of years.
House prices and household debt levels have risen significantly for years in several Scandinavian cities, leading some to warn of potential bubbles.
Denmark’s central bank said last year that a housing bubble was looming in Copenhagen, and the International Monetary Fund has said Sweden’s high household debt levels could stifle other areas of the economy.
Tollefsen said problems were caused when “over-optimistic investors” and “cheap financing” push prices sharply higher.
“This might have been the case in Stockholm and Gothenburg, where prices have raised a lot. And maybe also in Oslo the last 18 months, where we at present are in the middle of a correction,” he said.
More modest price increases in Copenhagen have merely brought values back to their nominal level of 2006, before the global financial crisis – “a fair bit” lower than comparable cities, Tollefsen said.
“Stockholm stands out as the most expensive one comparing to disposable income, while Oslo and Copenhagen have a low value per disposable income for the average home in a European context,” he added.
But big increases in incomes in the Nordic region’s capital cities in recent years and strict lending standards and debt regulations make him confident that “the payment strength can handle fairly drastic interest rate increases,” Tollefsen said.