Housing market analysis of greater Copenhagen: housing shortage, urban development potentials and strategies
Housing market analysis of greater Copenhagen: housing shortage, urban development potentials and strategies
Original title: Boligmarkedsanalyse for hovedstaden - Boligbehov, udviklingspotentialer og -strategier
Urbanisation and rising housing demand is a well-known phenomenon in many Western metropolitan areas. In Copenhagen, the population rose sharply from around 2006 and has been quite high ever since. This trend is expected to continue for many years to come.
Given the relatively strict geographic and regulatory supply restrictions in Copenhagen, housing supply has not responded adequately. This has fueled a gap between supply and demand resulting in a rapid and quite unstable housing price development. This implies at least two socio-economic challenges.
First, the limited supply means that only the relatively wealthy citizens can afford to live in the city, which may result in a loss of potential jobs and growth. Second, the price fluctuation may cause random redistribution of prosperity and, in worst cast, financial instability as seen over the financial crisis in 2008-09.
We have analysed the urbanisation and housing market development in the Capital Region of Denmark: the consequences, the growing need for new dwellings in the future, and the potential urban planning strategies and barriers.
The results of our analysis are threefold:
Housing supply in the region needs to grow by 5,000-9,000 dwellings per year for the next 20-30 years. This includes approximately 110,000 dwellings until 2035 and more than 150,000 dwellings until 2045. In particular, there will be a large demand for small apartments for young people in the city centre.
Urban planning strategies could provide approximately 270.00o dwellings – more or less equally distributed between the city centre and the suburbs.
A number of regulatory and capacity barriers must be overcome. In particular, we find major conflicts of interest between different municipalities in the region, between municipalities and other public actors; and between public actors and private developers.
The study is carried out in collaboration with Kuben Management and commissioned by the Danish Ministry of Transport, Building, and Housing.
In brief
Housing supply in the Copenhagen area must grow by 5,000 to 9,000 homes a year to stabilise real house prices. On current building rates, prices will keep rising at around 5.5 per cent a year for the next 25 years.
5% a yearReal house price growth expected over the next 25 years if building continues at the ten-year average rate, matching the rise of the previous 25 years.
110,000 homesHow much accomodation is needed in the capital region by 2035, rising to just over 150,000 by 2045, most of it in Copenhagen itself.
Almost 50%The real rise in owner-occupied house prices in Copenhagen since early 2013, against relatively stable prices across the rest of the country.
4,000 homesCurrent shortfall of small flats for young people under 60 sqm in Copenhagen, with a further shortfall of around 3,000 mid-sized flats for families with children.
270,000 homesMaximum development potential identified across the three strategies to 2035, against the estimated need of 110,000. Supply is not the binding constraint; barriers and incentives are.
Commissioned by the Danish Ministry of Transport, Building and Housing. Authors: Helge Sigurd Næss-Schmidt and Christian Heebøll, Copenhagen Economics, with Jens Henrik Haahr, Vilfred Hvid and Thomas Langaa Nejland, Kuben Management. Published January 2018. Projections to 2035 and 2045. Region Hovedstaden excluding Bornholm.
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About this analysis
Copenhagen Economics and Kuben Management analysed housing need in the Danish capital region and set out strategies for bringing supply and demand into better balance. The work is in three parts: the scale of the problem, assessed with a macro-econometric house price model and a micro-econometric model of housing need built on register data from Statistics Denmark; three possible development strategies, namely bringing new areas into use, densifying existing areas and making better use of the existing building stock, each sized for realisable potential to 2035; and the legal, economic and political barriers to delivery, drawn from focus group interviews with municipal planners, state bodies, interest organisations and developers. An advisory board of four external experts commented on the approach.
The authors state that the results in part one carry considerable uncertainty and rest heavily on DREAM population projections and on macroeconomic assumptions about interest rates and real growth. The strategies in part two are presented as a list of options rather than as recommendations, and are assessed without regard to the political, legal and economic obstacles to them. Infrastructure projects not yet planned are excluded, as are new building in protected areas such as Amager Fælled and development through land reclamation. The advisory board is not responsible for the content or conclusions.