Denmark: Surging Property Prices Puts Danish Bank Regulator on Alert

Just as Denmark ’s economy emerges from its last property bust, the country’s banking regulator says it’s on alert to prevent another bubble from forming.

The Financial Supervisory Authority is ready to raise capital requirements for banks and to deploy other measures to cool the market should it be needed, said Ulrik Noedgaard, the Copenhagen-based agency’s director general, in an interview.

“We do see signs that do make a supervisor worry,” he said. “That’s why I’m preaching the gospel that the credit institutions need to take caution now.”

Unprecedented monetary stimuli at home and abroad have driven down costs for borrowers. Danish 30-year mortgage rates are as low as 2 percent while one-year adjustable costs hover near zero. House prices had their biggest gain in nine months in January, up 2.3 percent from December, according to the statistics agency. Broker Nybolig said home sales in the first quarter were at the highest level since 2007, the year before the Danish housing market crashed and sent as many as 62 regional banks into bankruptcy.

“Our primary concern is, where will this take the property market here and especially around the larger cities,” Noedgaard said. “We already see prices picking up rapidly especially in Copenhagen. Can we keep that on a sustainable path?”

Denmark’s systemic risk council, led by central bank Governor Lars Rohde, said on March 27 that low rates could fuel a sharp build-up in risks to the economy.

Source – Bloomberg