Rising interest rates and high housing prices are creating significant barriers for young people in Denmark looking to enter the housing market. Over 50% of young individuals express concerns they will never afford a home, even after starting their professional careers.
The Young and the Housing Market Crisis
In recent years, Denmark has witnessed a troubling trend: young people are increasingly struggling to buy homes. According to a study conducted by Finans Danmark and reported by DR, Presently, more than 50% of the youth perceive housing prices and interest rates as excessively high, leading to despair about their ability to enter the housing market. The situation has deteriorated significantly from 2021, when approximately 23,000 first-time homebuyers aged 18 to 29 entered the market. By 2023, that number has dwindled to under 17,500, reflecting a decline of nearly 25%.
Escalating Costs and Financial Barrier
The financial landscape surrounding home purchasing has shifted dramatically. Young individuals now find themselves in a position where they typically need to take much larger loans than previous generations. Martin Visnæs Larsen, an associate professor at Aarhus University specializing in housing policy, emphasizes that this trend places unnecessary burdens on new buyers, especially when compared to those who have already established themselves in the market.
It has become significantly more expensive to borrow money for housing, compounding the challenges for young people who are just starting their careers. Close to half of the survey respondents noted difficulties finding properties that align with their financial expectations, while approximately 35% indicated they are unable to secure sufficient loans from banks to make their housing dreams a reality.
Shortage of Affordable Housing
The plight of young potential homeowners is exacerbated by a critical shortage of affordable housing options in urban areas like Copenhagen. Many young people are compelled to consider options in the outskirts of cities, where housing might be cheaper. However, according to Lo Ersare, a self-employed musician expecting twins, even these more affordable options come with hidden costs, such as higher transportation expenses due to longer commutes.
“The prices aren’t significantly different,” Ersare explains. “Many properties in suburbs like Høje Taastrup come with larger loans and ownership costs, making them just as unaffordable.” With a current residence of only 39 square meters in Copenhagen, Ersare and his partner have had to make sacrifices while searching for accommodations suitable for their growing family.
Barriers to Accessing Home Ownership
One of the contentious debates surrounding the housing crisis is whether young people should be allowed to use their pension savings to fund home purchases. While some suggest this may provide a solution, Larsen argues that such a move would only drive housing prices higher without increasing the overall supply. “If the goal is to enable more people to own homes in Copenhagen or other major cities in Denmark, we need to build more properties, not just allow buyers to bring more money to the table,” he insists.
The current focus of real estate developers tends to favor sales to rental companies or pension funds, which provide more lucrative offers than individual buyers can manage. As a result, many newly constructed homes are currently being converted into rental properties instead of being made available for purchase by individuals or families.
The Changing Landscape of Home Ownership
Experts, including Larsen, frequently call for increased construction of affordable housing to alleviate the struggles young people face in accessing the market. The push for more housing supply is critical in ensuring that homeownership is not just a privilege for the financially well-off but an attainable goal for a broader demographic.
As it stands, the narrative of homeownership in Denmark is facing a critical turning point. Young individuals are often left feeling hopeless as they watch the housing market shift further out of reach. The ongoing struggle for affordable and appropriate housing options reflects broader systemic issues in Denmark’s real estate market and speaks to the urgent need for policy changes that can address these challenges.
The predicament facing young buyers in Denmark highlights the intersections of economic instability, exorbitant interest rates, and an acute shortage of affordable housing. While many continue to dream of homeownership, the reality may be shifting out of reach without significant changes and innovations in housing policy.
