Friday, July 22, 2016

Analyst: The Danish Housing Market Risks Spiraling "Out Of Control" - Here's Why

Via Business Insider:

Negative interest rates could be about to cause some grave side-effects in Denmark. Tore Stramer, chief analyst at Nykredit in Copenhagen, warns that Danes might be struck by a new housing bubble, Bloomberg reports.

According to Stramer, the situation could spiral 'out of control' as the prolonged period of negative interest rates makes Danes all the more incautious to the eventuality that rates may rise again in the future.

In Stramers words to Bloomberg:

“To be concrete, there is a danger that Danes go blind to the risk of rates ever rising again. [...] That raises the risk of a major housing price decline, when rates at some point or other start to rise again”.

According to Bloomberg, some Danish banks, like Danske Bank, are assuming rates wont rise to positive figures until at least 2018. At the same time apartment prices are 5% higher now than they were when Denmark was hit by the housing bubble in 2006.

“It’s worth remembering that there’s a real risk that housing prices can see a dramatic fall, even though we’re not seeing a bubble in the classical definition of the term”, Stramer said to Bloomberg.

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