In his speech, Christian Kettel Thomsen emphasized that the largest house price increases over the past few decades have occurred in and around the capital. This is also where the population has grown the most. House price developments largely reflect where the demand for housing has been greatest. If, at the same time, there are restrictions on the housing supply in the areas where demand is growing the most, the result will be persistent pressure on house prices.
"The answer to high house prices is more homes – not more lenient lending rules," says Christian Kettel Thomsen. “Many of the proposals aimed at improving access to the housing market would primarily boost demand. When supply responds only slowly, much of the effect is likely to be capitalised into higher house prices, making it even harder for first-time buyers to enter the market.”
After several years of sharp price increases for owner-occupied flats in Copenhagen, there are now signs of a moderation in the market. Danmarks Nationalbank is following current developments closely and is keeping a close eye on whether price pressures are spreading to the rest of the country.
Experience shows that rapid house price increases can create vulnerabilities when accompanied by excessive risk-taking and imprudent lending. "In the current situation, it is crucial that we stick to the sound lending rules and credit principles that have been introduced since the Great Financial Crisis. They have played an important role in strengthening the resilience of both Danish households and the broader economy, says Christian Kettel Thomsen.”
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