Mr Jensen goes to town
By Per Hansen,Hansen Sonderby
The fact that changing demography and migration towards cities have impacted the property markets is hardly news – at least when it comes to a number of the world's larger countries. Now, however, it has even come to a small country such as Denmark.
As Denmark slowly recovers from the crisis in the property market that followed the burst in the property bubble in 2008, it is becoming clear that the recovery is limited to the country's industrial and commercial centers. A growing number of businesses in what is now known as the "outback" of Denmark face significant problems as they try to find finance for expanding or updating their present facilities. Mr Jensen (aka the average Dane) heads for the city, leaving only the elderly and the uneducated behind.
The long tradition of financing even commercial properties in all parts of the country with long-term, fixed rate loans based on bonds and secured by mortgages on specific properties seems to have come to an end. When financing commercial properties over 20 or 30 years, it is crucial to the lender that the property has what is known as "alternative use potential". If the current owner/operator of the property folds, for whatever reason, the lender may be stuck with the mortgage for another 10 or 20 years, and in rural areas with dwindling populations there is mostly very little chance that another business will be interested in acquiring the property. So the businesses try to find other financing that involves higher interest payments, which obviously does not solve the underlying problem and undermines the owner/operator's economic situation, eventually leading to financial disaster for the owner/operator and losses for the lender.
The lesson is: when investing in Danish property, in spite of the country's limited size, one should be extremely aware of the geographical risks.
Hansen Sonderby Advokatfirma, Randers SO, Denmark, T: +45 70 300 500
hansen|sonderby is a boutique law-firm in Denmark with offices in Copenhagen and Randers. Currently, the firm employs 11 lawyers all of whom are highly qualified in various fields of the law. Three of them specialize in Real Estate matters, offering a wide range of services within the field. Per Hansen is a partner in the firm and heads the three lawyer Real Estate department. He has more than 25 years of experience with Real Estate matters in Denmark and other countries. Per Hansen is Global Vice Chairperson of the GGI Real Estate Practice Group.