Danish Property Market Could Get Worse Before It Gets Better

The property market in Denmark could get worse, as property values are dropping, the jobs market is growing, and private levels of debt are high. House prices in Denmark have declined by 25% since their peak in 2007, and the government has predicted prices will fall by a further 5.5% this year.

In March, property values fell by an annual rate of 8.6%, according to Statistics Denmark, so at least the decline is slowing. Unemployment is being predicted to rise to 7.6% this year, up from 7.4% last year according to the Organisation for Economic Corporation and Development.

According to Moody's, this combination of factors has left many households vulnerable. It estimated private debt levels reached 142% of GDP at the end of 2010. This rate is twice the European Union average of 79%.

Moody's has downgraded nine Danish financial institutions, and the financial crisis has claimed five banks since 2011. In spite of this Denmark is still one of only 12 nations to hold its triple A rating, and has emerged as something of a safe haven due to its fiscal discipline.

Denmark has a current account surplus, and last month the government cut the budget deficit target to 3.8% this year, and 1.7% for 2013. In comparison the average deficit in the European Union is 3.6% for 2012, and 3.3% for 2013.

Although Denmark is being seen as a safe haven, Moody's is cautioning investors against assuming it's immune from the debt crisis in Europe. It points out that although Denmark still has its own currency the Danish banks and economy is exposed.

The Danish economy is relatively strong in comparison with other countries in Europe, and this should mean household debt levels decrease in the future.