I Want to Buy an Apartment in Copenhagen, Denmark – What Should I Take into Consideration?
As with all other major decisions in life, buying an apartment in a buzzing and vibrant metropolis such as Copenhagen requires many considerations. First and foremost, you need to find out which type of apartment you want to purchase. Because in Denmark, two types of apartments exist and they both come with different obligations and requirements.
Things to consider when you want to buy a flat in Copenhagen
As mentioned above, there are two types of apartments that you can purchase in Denmark: condominiums (ejerlejlighed) and co-op apartments (andelslejlighed). The difference between them is very simple.
When you buy a condominium, you own it.
When you buy a co-op apartment, you don’t own it.
In the latter case, you become part of a tenant-owner’s association, which grants you the right to live on the association’s property (in this article, however, we will be calling shareholders for owners too for simplicity’s sake).
Which of the two is better for you depends entirely on your needs and wishes. Below, we have gathered the most important pros and cons that every potential flat owner should take into consideration when looking to buy an apartment in Copenhagen, Denmark.
Condominiums are typically more expensive than co-op apartments
Condominiums are almost always more expensive than co-op apartments, meaning you have to borrow more money if you want to buy the former. There is a silver lining, of course, and that is that a mortgage is cheaper than a bank loan.
When buying property, which a condominium qualifies as in Denmark, you can finance up to 80% of it with a mortgage. Up to 15% can be financed with a bank loan and you must put down at least 5% of the purchase price. However, this only applies for Danish and EU/EEA citizens. Read more in a previous article here.
The story is different if you want to invest in a co-op apartment. As you are buying a share into the tenant-owner’s association owning the entire property – and not the individual property per se – you cannot obtain a mortgage. Instead, you must take out a bank loan which is more expensive.
Condominiums and co-op apartments impact your financial situation differently
When you buy a condominium, you – and only you – decide which loans you want to take. When you buy a co-op apartment, not only do you buy yourself into the tenant-owner’s association’s property. You also buy yourself into its financial situation.
In other words, its past loans and financial decisions are now yours as well.
This highlights the importance of always thoroughly investigating a tenant-owner’s association’s (andelsbolig forening) financial status before committing further. Because if the association runs into any financial trouble, then guess who has to pay? That’s right, you, the shareholder/tenant.
Condominium owners must pay property tax – co-op apartment owners don’t
Another matter is that condominium owners are obligated to pay a monthly property tax. The property tax can be as high as a few thousand DKK, potentially leaving a large dent in your budget.
Co-op apartment owners don’t have to pay property tax.
Condominium owners are free to sublease their property – guess who necessarily can’t
A third matter is that condominium owners can sublease their property. Co-op apartment owners might be able to, but it is the tenant-owner’s association’s statutes that have the final say.
A certain sense of community is expected no matter which apartment you buy
We already tapped into this earlier, but when you buy a co-op apartment, you are expected to take part in joint duties, such as maintaining the property, financial decisions etc.
This is also the case for condominium owners but to a lesser extent. Even though you own your home, you still share roof, common areas etc. with the other tenants in the building. As such, you are expected to contribute to maintenance expenses.
Your choice of apartment might limit your refurbishing dreams
Co-op apartment owners aren’t allowed to make major changes in their home without a permit from the tenant-owner’s association’s committee.
With a condominium, you are free to do whatever you want because you own the property.
Required maintenance varies between the different apartment types
Co-op apartment owners are required to maintain their home. Meanwhile, condominium owners decide for themselves how much effort they want to put into maintaining their home. However, it is advisable to maintain your property regularly to keep the value from diminishing.
Condominiums are usually more profitable when sold at the right time
A condominium can be a source of profit should you decide to sell it someday. Though for that to happen, you have to pay off your debt and your property’s value must increase.
Prospects of profit aren’t as favorable for co-op apartments, as they have a price cap. The price cap is determined by factors such as the property’s value and its debt.