Territorial Review Copenhagen - Region Hovedstaden

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1.4.4 Urban amenities
Housing
Housing prices in Denmark have risen dramatically since 1995, although
they have fallen by 15% since 2006. Mainly due to population growth,
migration, and low interest rates on loans, housing prices in the Capital
Region increased considerably from 1995 to 2006, especially in the northern
and central municipalities. Prices of owner-occupied dwellings in
Copenhagen quadrupled from 1997 to 2007 (Figure 1.25) and rose even
higher in such areas as Amager and Sydvestkvarteret (City of Copenhagen,
2008). Consequently, residents generally perceive their city as a place where
it is difficult to find good housing at a reasonable price (Figure 1.24).
Affordability may have also been reduced by national factors, particularly
the availability of interest-only mortgage loans in Denmark. Low rates have
allowed average mortgage debt levels to rise throughout Denmark, and the
income needed to service mortgages did not keep pace (OECD, 2005). 28
Currently, the falling prices and the expectation of future price drops have
contributed to a more restrictive lending policy from real estate credit
institutions. Owner-occupied flats constructed during 2006-07 are now
difficult to sell even at reduced prices. The construction of additional
housing will probably be curtailed until developers rent existing stock and
recoup some of their losses. 29 While housing costs have fallen from their
peak in 2006, developers are constrained to construct moderately priced
units, particularly given the impact of global financial turmoil, which is
projected to result in a sharp contraction of housing construction.
Compared to other large cities in the OECD, indicators suggest that
Copenhagen homeowners pay a high cost for housing relative to their
income. The ―median multiple‖ constitutes one standard tool to measure
income affordability; it measures the ratio of median house price to the
median household income in a city. The ―median multiple‖ facilitates
comparisons though it is by no means the only affordability indicator in
use. 30 Typically those economies where individuals need over five times
their annual salary to buy a home are ranked ―severely unaffordable‖, which
is followed by ―seriously unaffordable‖ (4.1 – 5.0), ―moderately
unaffordable‖ (3.1 – 4.0), and ―affordable‖ (3.0 or less) (Demographia,
2008). Using this methodology, the area could be characterised as ―severely
unaffordable‖ with high rates in the City of Copenhagen (15.0) and Malmö
(10.6). Nevertheless, additional caution is warranted when interpreting and
drawing conclusions from this data. The ―median multiple‖ does not take
into account house and lot size differences despite wide international
variation. 31 This is a critical omission given that the average size of
dwellings in Denmark, averaging 109.6 m 2 per dwelling, is the highest