Housing Construction
Housing construction in the Öresund Region has gone from a veritable construction boom to a dramatic stagnation on both sides of Öresund.
- Housing Growth in the Öresund Region 1991-2010
Source: Statistics Denmark and Statistics Sweden
During a long period from the middle of the 1990s and up until 2003, only about 5,000-8,000 dwellings were built per year (including demolitions) in the entire Öresund region. In the beginning of the 1990s the housing growth was good in Skåne, while it was extremely poor on the Danish side of Öresund. Among other things, the Danish situation was due to many very small dwellings being consolidated in and around Copenhagen. At the same time there was very little housing construction and a number of dwellings without modern conveniences were demolished - a trend similar to the one prevalent in the 1980s.
In 2004 there was a nearly explosive increase in the dormant housing construction in and around Copenhagen, but also in general in the Capital Region of Denmark and Region Zealand. This development must be seen in connection with the improved economic situation in Denmark; this was especially clear in Copenhagen where the harbour areas expanded and the district of Örestad was built. The escalation of production of new buildings must also be seen in relation to the inflated price expectations at that time, when the price of owned dwellings in the Capital Region of Denmark rose approximately 40 percent from 2004 to 2006.
In Denmark the economy has turned since 2006. The demand for tenant-owned dwellings has dropped dramatically and many of these types of dwellings are either rented or empty. This also holds true for a large part of the extensive new constructions, which therefore have been extremely limited since 2009. Housing market development on the Danish side of the sound has thus been marked by a price bubble that has now burst. On the Swedish side development has been much more stable, but housing construction is still very modest despite a relatively large increase in population. In 2010 the number of newly produced units has decreased to about 3,000 on the Danish side and 2,000 on the Swedish side. These figures are at par with the last years in the 1990s.
Since 2001 a total of 83,000 dwellings have been built on the Danish side and 38,000 more on the Swedish side of the sound. The largest number of new dwellings are to be found in and around Copenhagen, in western and southern Zealand as well as in south-western Skåne.
In relation to the increase in number of adults aged 20 or above, there is a remarkable misalignment between the development in Skåne and Zealand. In Skåne, the population of adults aged 20 or above has increased by 97,000 since 2001, and yet in the same time period, only 33,000 additional dwellings have been constructed. In Zealand, etc., the population of adults aged 20 or above only increased by 59,000 for the same period, but 83,000 more dwellings have been constructed. The relatively high level of housing construction in Zealand during the last 10 years must therefore also be seen in connection with the fact that the number of empty dwellings has increased by 31,000, and is now at 70,000, for the same time period, which means that 6 percent of all dwellings are empty. The proportion of empty dwellings looks about the same in all of Zealand. The increase in housing production in Zealand does indicate a greater consumption of dwellings per inhabitant, but has also meant that there is more empty housing because of the skyrocketing of the housing prices, a fall in demand, and falling prices. Conversely, the growing population figures all over Skåne have been somewhat higher than the increase in housing stock, indicating that consumption of dwellings has dropped and will probably not correspond to the growing need.
Housing prices
Housing prices in Denmark, and to a lesser extent in Sweden, have been through a very turbulent period in recent years, but prices are again rising slightly after the housing bubble burst around 2006. This does not apply to the Zealand Region. Over the last few years, an increasing SEK rate has contributed to affordable housing on the Swedish side of Öresund also rising in price.
From 1997 until the end of 2003, there was, in general, an even and uniform price development in both Denmark and Sweden. The price for single-family houses has seen annual increases of 5 to 10 percent. While owner-occupied apartments rose by 10-15 percent.
In the Capital and Zealand Regions, increases were in line with, or slightly higher than, Denmark in general. In Skåne, price developments were in line with general Swedish increases.
But price increases accelerated in Denmark from 2003 to 2006, when the price of a single-family house or an owner-occupied apartment in Copenhagen and the Capital Region rose by over 80 per cent. Contributing to the sharp increase in housing prices in Denmark was the introduction in 2003 of interest-only mortgages with flexible interest rate adjustment; which were introduced at a time when short-term interest rates were historically low. Housing prices and higher borrowing against home equity could rise sharply while housing costs could be maintained or even decreased. During these years, price increases were higher in Copenhagen and the Capital Region than in the Zealand Region and Denmark in general.
The price of a single-family house has, over the years, been around 1/3 lower in the Zealand Region than in the Capital Region, so the price relationship has been relatively stable, except for a few years around 2006, which saw a particular price boom in the Capital Region. In the fourth quarter of 2010, the price difference, however, increased again as a single-family home in the Zealand Region cost 45 percent less than in the Capital Region. Compared to the Capital Region, a family house in the Skåne Region costs about 40 percent less, and during the price boom years of 2005-2006, 50 percent less. The price difference is now substantially lower.
The housing market’s price bubble peaked in 2006, first for owner-occupied apartments and first in Copenhagen and in the Capital Region. In Copenhagen the square meter price for an owner-occupied apartment reached EUR 4.200 in the second quarter 2006, while a family house reached EUR 3.800 in the fourth quarter of 2006.
Danish housing prices have since fallen dramatically. From 2006 to 2009, prices fell in and around Copenhagen by up to 35 percent. Since then, prices have stabilised and increased slightly to approximately the prices of 2005. The price fall has been less the further one gets from the Copenhagen area.
After the first quarter of 2009, prices for single-family houses etc. again increased in Copenhagen and the Capital Region, while prices in the Zealand Region and the rest of Denmark have been fairly stable over the past few years. Measured in DKK, the Swedish prices, because of rate trends, immediately increased most and the Scanian housing prices are therefore no longer as attractive to Danish families. A single-family house etc. in the Skåne Region, which previously cost the same or slightly less than in the Zealand Region, has in the last year reached a price of up to 1/3 more than in the Zealand Region. And compared to the price of a single-family house in the Capital Region, a family would, in the second quarter of 2006, only have to pay 47 percent of the price in the Skåne Region, while they had to pay 73 per cent of the price in the fourth quarter of 2010.
The differences in housing prices on the Danish and Swedish sides of Öresund are significant for human settlement patterns and thus migration flows and commuting. For those residents of owner-occupied homes on either side of Öresund, these are investments where the differences in housing prices are affected by currency fluctuations and differences in interest rates, but the actual housing costs are also determined by the large differences in credit availability (including the special Danish debenture loans versus typical Swedish short term loans) and tax and deduction regulations in the two countries.
In order to compare the price levels and price trends in a reasonable fashion, housing prices on both sides of the Öresund have been converted into the same currency. This means that homes on the Swedish side of Öresund, during the period around 2008 and 2009, were particularly cheap in DKK due to the low SEK exchange rate, and in 2011 have become relatively expensive due to the increasing SEK exchange rate. When measured in SEK the reverse is true. Danish housing was particularly expensive in 2008 and 2009 and relatively cheap in late 2010. The reason is that while the DKK rate fluctuated only slightly compared to the Euro, SEK has experienced significant fluctuations. SEK fell in the autumn of 2008 from a stable rate against the Euro and was worth 14 percent less in the first quarter of 2009. It has since risen again and, after 2 years, was worth 23 percent more in the first quarter of 2011.
- The value of 100 Euros in DKK and SEK
Source: Denmark’s National bank
- Single-family houses etc. Average price per square meter in EUR
Source: Realkreditrådet (Assoc. of Danish Mortgage Banks), VärderingsData AB and Statistics Sweden
Note: Prices for the Skåne Region in the fourth quarter of 2009 to the fourth quarter of 2010 are based on the very similar trend in the average purchase price per single-family house, according to Statistics Sweden.
- Owner-occupied apartments. Average price per square meter in EUR
Source: Realkreditrådet (Assoc. of Danish Mortgage Banks), VärderingsData AB and Statistics Sweden. Note: New Swedish data is unavailable.
Migration
Migration over Öresund started some 10 years ago, with the flow being from Zealand east to Skåne, but over the last number of years, the majority of migration has been westwards.
Since the Öresund bridge opened, there has been a tremendous growth in the numbers migrating across Öresund. From around 1,000 to a climax of 6,400 in 2007. The number dropped slightly in 2010 to 5700.
- Migration over Öresund 1998-2010
Source: Ørestat
One of the main drivers of Danish migration to Skåne, was the option of more appropriate and affordable housing. To this was added the lower cost of living and, for some, the more lenient family reunification laws in Sweden. For most, the appropriate and cheap housing in Skåne (often in Malmö) was combined with being able to keep attractive and well-paid jobs on Zealand (often in Copenhagen). It was thus the great Danish migration to Skåne which created a wave of commuting in the opposite direction from Skåne to Zealand. The difference in housing prices has probably had a huge influence on migration behaviour. The large gap between the high housing prices in the Capital Region and the low prices in the Skåne Region peaked in 2007, along with the migration flow when 4,400 moved from Zealand to Skåne in 2007. The difference in price then fell dramatically, and the migration flow eastward from Zealand to Skåne in 2010 dropped below the level in 2004; i.e. a good third less than the peak in 2007.
The opposite migration flow from Skåne to Zealand has increased dramatically in recent years, and in 2010, the migration flow, for the first time since the bridge opened, has been greater westwards than eastwards; 250 more moved from Skåne to Zealand. Just as the migration flow to Skåne is characterised by Danes, the same is also true of the flow in the opposite direction, since it includes many Danes moving back to Zealand after living in Skåne for a period. Compiled by nationality, Danes constitute almost 3/4 of all persons moving between Zealand and Skåne, while migrants from other countries constitute 10 percent and Swedes make up almost 15 per cent. The proportion of migrants not born in Sweden or Denmark has increased markedly over the period, but has stabilised at around 1/3 of all migrants - in both directions. For several years the net number of Swedes who migrated from Skåne to Zealand et al. was minimal and it was only in 2010 when the figure almost reached 200. The cheaper Danish housing prices may be attractive to Scanians, but the deteriorating job opportunities, due to increasing Danish unemployment, may discourage them from migrating to the Danish side.
Migration over Öresund is concentrated in the two major cities of Copenhagen and Malmo, with 70 percent of all migration to or from Zealand affecting Greater Copenhagen; i.e. Copenhagen City and Copenhagen’s environs, while Malmö is responsible for 60 per cent of all migrations to or from Skåne.
- Number of relocations from Zealand et al. to Skåne, according to migrants’ nationality 2001-201
Source: Ørestat
- Number of relocations from Skåne to Zealand et al., according to migrants’ nationality; 2001-2010
Source: Örestat
Migrants across Öresund consist predominantly of people of working age and young children.
- Number of relocations across Öresund according to migrants’ age; 2010
Source: Örestat
In terms of age profile among those who relocate between municipalities on Zealand et al. and between municipalities in Skåne, there are relatively many 25 to 34 year olds, often as families with young children, moving across Öresund. However, there are relatively few 16 to 24 year olds moving to the other side of Öresund. The number of elderly people moving when they are over 64 years is generally low, but the numbers moving over Öresund are particularly low.
- Age distribution (percent) among migrants between municipalities on Zealand et al., in Skåne and Öresund migrants; 2010
Source: Örestat
If we look solely at the net number of migrations from Zealand et al. to Skåne, there were, until 2007, a significantly greater number of relocations to the east than to the west. This relocation surfeit applied to both the young and middle aged. The migration flow consists predominantly of Danes, and after 2007, Danish migration is increasingly back towards Zealand. In 2010, it is the 25-34 year-olds who are moving back with their young children. Slightly older people with older children and young people under 25 years are more likely to stay in Skåne.
- Net number of relocations from Zealand et al. to Skåne according to migrants’ age
Source: Örestat
