Danish property market may see correction

Denmark’s property market may be facing another correction after a housing boom that turned to bust at the height of the financial crisis failed to push prices low enough to entice buyers.

The Nordic country’s housing market may still be as much as 25 percent overvalued, according to Jes Asmussen, chief economist in Copenhagen at Svenska Handelsbanken AB.

“Denmark is at risk of getting trapped in a very, very slow growth environment,” Asmussen said in an interview. “There’s a risk that we will lose credibility in the financial markets in the long run.”

House prices plunged 16 percent from a 2007 peak through the first quarter of 2009 as a construction and lending boom ended. The collapse triggered a banking crisis that has claimed more than a dozen lenders and turned Denmark into Scandinavia’s worst-performing economy. House prices dropped an annual 3.2 percent in the second quarter as the market remains “frozen” and properties for sale reached a record high, the Association of Danish Mortgage Banks said Sept. 15.

Source: Bloomberg