Investing in Denmark

Buying a house will be the biggest purchase of your life, and you want to do it right. In this video I’ll tell you six things that are an absolute must-know if you plan to buy a house in Denmark.

You can see my gigantic guide on buying a house here. 

M2 Scam

Important! The apartment sizes advertised in the main portals is not the real apartment size**.**

In Denmark, you’ve two ways to measure the size of a flat:

• BBR-boligareal: this is what you see in adverts (see above), in the realtors’ sites, etc. this measurement includes the apartment itself, but adds to the total your “share” of the corridors/hallways and common areas.
• Tinglyst areal: this is the “real” area — your apartment itself, including balconies, but no corridors and common areas. This is what you really get.

The difference between the two measurements can be big. I bought an apartment that is 102 sqm in tinglsyt area, but was advertised as 113m. In the building next to mine, an apartment sized exactly like mine — 102 sqm, with exactly the same layout — was advertised as 125m (!), all because it “owned” more of the corridor and basements.

These extra sqm are useless. You can’t, after all, put stuff on the corridor, nor send your visiting friends to sleep in the common areas. You’re paying extra for meters that you don’t need and can’t really use. Worst thing is you’ll be paying property taxes on those corridors and common areas.

Note — You should know that in many cases, even the tinglyst areal is incorrect and/or exaggerated — especially in older apartments. If you’re very interested in a specific place, your best bet is to measure the sizes yourself as well.

Ejer vs. Andel Apartments

There are two types of apartments — ejer and andel.

For “Ejers”:

• You’re the owner of the flat, and, similar to in other countries, you pay for joint expenses as cleaning of the halls, the vicevaerten (“house master”), garbage removal, building insurance, etc. to an owners’ association called the “ejerforening”.
• As it’s your apartment,. , and do all sorts of stuff that would be normal in every other country. you can do what you want with it You can rent it out, do Airbnb, add and remove walls.
• If you buy an Ejer, you can get all the cheap and fancy loans.

For Andels:

• You’re not the full owner of the flat — you’re are an “investor” or shareholder in an association that owns the building.
• As you’re not the “owner”, you give up power and control to the association. Andels have a lot more rules and regulations, and they’re often very strict.
• For example, you can’t rent out your andel — or, if you’re able to, you can only do so at a fixed, low price and for a set period of time, and only after receiving approval from the association.
• You’re also not allowed to set the selling price, if you decide to move out. Instead, the selling price is fixed by the association.
• On top of the regulations, the running costs for andels are usually much higher than for the ejers — both the joint expenses to the association and the loans to buy the andels are more expensive than for ejers.

Interest Only Loans

• When you loan money, you’re required, over the loan period, to a) pay an interest on the loaned amount, and b) to repay the loan itself, this in installments. If you loan money for thirty years, each year you would need to pay 1/30th of the loan value back to the creditor, plus interest.
• In Denmark, we’ve loans that let you skip b) for the first ten years — effectively making your loans only interest. You don’t need to worry about installments on the principle for a full decade.
• While interest rates are very low, property prices are high — and, if you loan, for example, 3m DKK for thirty years, besides the interest, you would be supposed to pay back 100.000 DKK every year. Cashflow-wise, this can be a killer for most people. It’s a lot of money.
• If you get an interest-only loan, buying a place can be cheaper than renting out in the vast majority of cases. Also, you would’ve more money in your pocket every month. Cashflow. That’s what you want.
• Had it not been for this rule, I would’ve not bought my apartment. This is what makes the deal good.
• The Catch – “No repayment” loans have slightly higher bidraggsats — more on this in a minute.

This is something you need to negotiate with your bank, and I even built a course around that because it’s that important!

Bidragssats

• The bidragssats are fees, set by the banks, to make money off you even in you pay zero (or negative!) interest rate. For a fixed 30-year loan without repayments, this fee is 1% per year.
• These fees are absolute bul****t. The banks have carteled and — as they can’t make money off us with high interest rates, they just raise these fees in concert. It’s ridiculous.
• This means that even if the interest rate on your loan is 0,15%, your effective rate — what you’ll need to pay every year as “interest” — is around 1%. There’s no way around this. (Or, if you know a way around this, please let me know!)
• How much bidragssats you’ll need to pay depends on four factors:
  • a) from which bank and credit institute you borrow
  • b) how much of the value of the apartment you need to borrow
  • c) if you took repayments or no repayments
  • d) what type of loan you get

So don’t be fooled. Always ask the bank about the bidragssats. You really won’t pay 0%, 1% or 2% — ask banks for what is you real, actual rate.

Mortgages & Kurs

In Denmark, it’s not banks who borrow you money for your mortgage. You also don’t borrow (at least directly!) from the so-called mortgage institutions – Real Kredit Danmark, Nordea Kredit, and their cousins.

Instead, when you set up a mortgage, you borrow directly from investors: think big, institutional investors – e.g. pension funds, hedge funds, and other big-league players.

In Denmark, when you set up a mortgage, the mortgage institutions create bonds – “realkreditobligationer”, they’re called – which the institutions in turn sell to investors.

In practice, this means:

• When you need to get a mortgage for, say, 2m DKK, your actual debt will be more or less – think 2.2m, or 1.8m depending on the bond setup you choose. The lower the interest, the bigger the debt.
• If you get a fixed rate for, say, 1% — as many did in 2021 — if the rate goes up to 4% (as it appear it could!), you can literally cancel off a big part of your loan.

This is complex and unlike any other country I’ve come across with. I made a deep-dive report (linked below) you can check out to get it explained in depth.

Capital Gains Not Taxed

• Let’s say you bought your apartment for 3m. If you would sell it for 5m, you’ll have a capital gain of 2m. In Denmark, this gain is not taxed. Hard to believe, considering that Denmark is the highest-taxed country in the world and basically everything else is taxed (and very highly so).
• In practice, this is the case because you in effect pay high property taxes — based on the valuation of your property — every year. But still, it’s nice if prices go up big!
• There’s a catch, though — you don’t pay capital gains if you’ve been living in the property you’re selling. If you bought, rented it out, and then sold, you’ll need to pay 35% of the gain or more to Skat.