Sección 7. Manipulación y almacenamiento
7.3 Usos específicos finales:
Following a steady increase in Danish real estate prices with average prices doubling since 1998, the market became subject to a sharp correction in Q4 06 when prices for owner- occupied flats started falling. With a time lag of approximately three quarters, prices of single family houses and weekend cottages followed this development, albeit at a considerably more muted pace. In light of the number of dwellings completed (and started) as well as the number of building permits sharply contracting in recent months (Figure 201 and Figure 202), the average interest rate for (shorter and longer-dated) mortgage loans declining throughout 2009 (Figure 203), and the average disposable income slightly increasing, we observed the first signs of a stabilisation in housing prices in Q2 and Q3 09 (Figure 198). Again, this development was led by owner-occupied flats where cash prices slightly increased. In the case of single family houses and weekend cottages, cash prices stopped falling. On average, Danish house prices had contracted by 10.8% y/y in Q3 09, the latest date for which data were available. Prices for owner-occupied flats had contracted by 12.4% y/y over the course of the same period.
Largest per capita mortgage market
A Danish peculiarity: the ‘special balance principle’
First signs of stabilisation after sharp price correction
Figure 198: Danish house price growth (2006 = 100) (in ‘000) Figure 199: Net Danish mortgage lending (monthly in DKKbn) 0 25 50 75 100 125
Mar-92 Mar-95 Mar-98 Mar-01 Mar-04 Mar-07 Mar-10
One-family houses Weekend cottages
Owner-occupied flats
-5 5 15 25
Jan-94 Jan-98 Jan-02 Jan-06 Jan-10
Source: Statistics Denmark, Barclays Capital Source: Realkreditrådet, Statistics Denmark, Barclays Capital
Figure 200: Property transactions (quarterly in ‘000) Figure 201: Building permits (monthly in ‘000, nsa)
0 10 20 30 40
Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09
0 1 2 3 4 5
Jan-94 Jan-98 Jan-02 Jan-06 Jan-10
Source: Statistics Denmark, Barclays Capital Source: Statistics Denmark, Barclays Capital
Figure 202: New buildings (monthly in ’000 sa) Figure 203: Interest rates on DKK mortgage loans (%)
0 1 2 3 4 5
Jan-94 Jan-98 Jan-02 Jan-06 Jan-10
Started Completed 0 2 4 6 8
Jan-03 Jan-05 Jan-07 Jan-09
< 1yr 1yr - 5yrs 5yrs - 10yrs > 10yrs
As the volumes of monthly net mortgage lending still are declining, however, we remain cautious as to whether the stabilisation in house price growth already signals a broad-based recovery (Figure 199). Adding to this uncertainty is macroeconomic data, which point towards an ongoing rise in unemployment figures and the potential risk of increasing interest rates once Danmarks Nationalbank swings into a hiking cycle. The concerns are also supported by more recent data, which show that the number of property transactions in Denmark remain on relatively low levels – despite a light recovery in Q2 09, the latest date for which data were available. In Q2 09, the number of property transactions increased to 18,552 units from 14,189 units in Q1 09. Still, in Q2 08, the respective figure amounted to 26,491 units (Figure 202). According to data from the Association of Danish Mortgage Banks, this upward trend continued in Q3 09, when turnover in single-family houses was down c.13% y/y, whereas the number of transactions in owner-occupied flats had increased by nearly 15% y/y61. Nonetheless, the time that flats which have been put up for
sale remain on the market is high, despite a stabilisation at just under eight months for both house and owner-occupied flats. Demand thus seems to be the crucial factor for a sustainable recovery of the Danish housing market.
As at end-January 2010, the latest date for which data were available, total domestic lending (excluding loans to MFIs by Danish mortgage institutions amounted to DKK2,285bn, up 4.9% y/y from DKK2,178bn a year before62. Approximately 60% of the loans granted were
raised on owner-occupied flats and second homes, which together account for circa 75% of the total loan volume. Whereas roughly 55% of all mortgage loans granted are subject to a fixed interest rate, floating rate products, which have become increasingly less popular as of late, account for the remaining 45%.
The Danish mortgage market is controlled by five players. All of these entities are special- purpose banks whose assets exclusively consist of mortgage loans and reserves and which need to be funded through the issuance of mortgage bonds and equity. At least 60% of the reserves have to be invested in alternative instruments of higher quality and liquidity than mortgage bonds. As in the years before, the market is dominated by Nykredit Realkredit whose market share increased to 55.9% of net new lending in 2009, from 40.7% in 200863.
The institution’s gross new residential lending amounted to DKK164bn in 2009, up from DKK112bn in 2008, thereby corresponding to a market share of Danish residential mortgage lending of 48.9%, ie, slightly up from 47.4% in 200864. The second-largest lender,
Realkredit Danmark, which is the Danske Bank Group's mortgage finance specialist, benefited from a market share (including repo loans) of 28.2% as at year-end 2009, slightly down from 30.5% a year before65. Market shares of domestic rivals such as Nordea Kredit,
which slightly increased to 12.9% in Q4 09 from 12.6% in Q4 08, BRFkredit, which fell to 8.5% in 2009, from 9.3% in 2008, or DLR Kredit, which stood largely stable at 5.7% in 2009, from 5.8% in 2008, were at markedly lower levels (Figure 204).
61 Source: Danmarks Nationalbank, Monetary Review, Q4 2009. 62 Source: Statistics Denmark.
63 Following the acquisition of Totalkredit in 2003, Nykredit Realkredit became the largest Danish mortgage lender. 64 Source: Nykredit, Annual Report 2009.
65 Source: Danske Bank, Annual Report 2009.
Recovery still lacks sustainable momentum
Modest increase in mortgage lending
Market controlled by five mortgage institutions
Figure 204: Danish mortgage lenders
Name Market share* Rating Lending activities
Nykredit Realkredit 55.9% Aaa** After the acquisition of Totalkredit, a Danish mortgage bank, Nykredit
became the largest mortgage bank in Denmark, being active in all lending activities
Realkredit Danmark 28.2% Aaa Realkredit Danmark specialises in mortgage lending secured by residential,
commercial, agricultural or industrial properties. The entity, which dates back to 1851, is part of the Danske Bank Group.
Nordea Kredit 12.9% Aaa All property categories except for some types of publicly-subsidised
building projects. Nordea Kredit, which was formed in 1993, is part of the Nordea Group.
BRFkredit 8.5% Aa1*** BRFkredit offers mortgage loans against a mortgage on owner-occupied
homes, commercial properties, and subsidised housing. In the corporate lending segment, BRFkredit focuses on loans for office and business properties and for private rental and cooperative housing. Loans for owner- occupied homes accounted for 44% of all lending as at year-end 2009. BRFkredit dates back to 1797.
DLR Kredit 5.7% Aa1 DLR Kredit focuses on mortgage loans for the financing of commercial
properties (agricultural properties and urban trade properties – private rental housing, co-operative housing, office and business premises, manufacturing and manual industries and social housing). Note: * Company information, **Aa1 for older series, ***Aa2 for older series. Source: Company information, Barclays Capital
Denmark (Realkreditobligationer)
Name of debt instrument(s) Realkreditobligationer
Legislation Law enshrined in 1850, modified in 1970, 1989, 2001, and 2003
Special banking principle Yes. new mortgage institutions
Restrictions on business activities
All types of mortgage lending as well as some ancillary activities
Asset allocation Cover assets remain on the balance sheet and can be allocated to a specific series, which serves as
coverage for outstanding bonds, either mutually or on a stand-alone basis
Inclusion of hedge positions Hedge positions cannot be included in the asset pool, but the so-called balance sheet principle provides
a protection against mismatching
Substitute collateral Up to 2% substitute collateral may be used temporarily
Restrictions on inclusion of commercial mortgage loans in the cover pool
No
Geographical scope for public assets
Not applicable
Geographical scope for mortgage assets
No legal limitations, but the issuer’s strategy is focused on domestic business
LTV barrier residential 80% (60% for secondary residences; 84% for subsidised housing facilities with a public sector
guarantee for 65-84%)
LTV barrier commercial 60% for industrial and commercial real estate; 70% for agricultural mortgage loans and 40% for other
types of real estate, including greenfield land Basis for valuation = mortgage
lending value
No. The "amount that a professional purchaser is assumed to be prepared to pay".
Valuation check Annual examination
Special supervision Yes. Finanstilsynet – the Danish banking regulator
Protection against mismatching We believe the protection against mismatching is rather strict. The so-called ‘special balance principle’
strongly restricts market and liquidity risk. Also, borrowers must compensate bondholders for early asset repayment.
Protection against credit risk –
Protection against operative risk No. Neither a back-up servicer nor a cover pool administrator is stipulated
Mandatory over-collateralisation No
Voluntary over-collateralisation is protected
Yes
Bankruptcy remoteness of the issuer
No, but the assets within the cover pool are exempt from bankruptcy proceedings
Outstanding covered bonds to regulatory capital
–
In the event of insolvency first claim is on:
All mortgages
External support mechanisms In the event of insufficient pool assets proceeds to cover their claim, mortgage bond investors rank
ahead of senior debt holders. In addition, shareholders may extend some other form of support (eg, guaranteeing the ‘top slice’ of the mortgage loans)
UCITS Art. 22 par. 4 compliant? No
CRD Annex VI, Part 1, §65 compliant?
No. As no preferential treatment as defined by CRD
Denmark (Særligt Dækkede Realkreditobligationer, Særligt Dækkede Obligationer)
Name of debt instrument(s) Særligt Dækkede Realkreditobligationer (SDRO), Særligt Dækkede Obligationer (SDO)
Legislation Law enshrined in 1850, modified in 1970, 1989, 2001, 2003, and 2006/07
Special banking principle SDRO: mortgage banks. SDO: universal and mortgage banks as well as ship financing institutions after
being licensed by Finanstilsynet – the Danish banking regulator Restrictions on business
activities
SDRO: All types of mortgage lending as well as some ancillary activities. SDO: no
Asset allocation Universal banks are required to register assets that serve as collateral for covered bonds in a separate
cover pool. In the case of mortgage banks, cover assets remain on the balance sheet and have to be allocated to a specific series.
Inclusion of hedge positions Hedge positions cannot be included in the asset pool, but the so-called balance sheet principle provides
a protection against mismatching
Substitute collateral Up to 2% substitute collateral may be used temporarily
Restrictions on inclusion of commercial mortgage loans in the cover pool
No
Geographical scope for public assets
Not applicable
Geographical scope for mortgage assets
No legal limitations, but the issuer’s strategy is focused on domestic business
LTV barrier residential 80% for residential mortgages with maximum maturity of 30 years and maximum interest-only period
of 10 years; 70% (75% from 2009) for residential mortgage loans with longer maturity and/or interest only periods; 60% for secondary residences; 84% for subsidised housing facilities with a public sector guarantee for 65-84%)
LTV barrier commercial 60% for industrial and commercial real estate (may be raised to 70% under certain conditions); 70% for
agricultural mortgage loans and 40% for other types of real estate, including undeveloped land Basis for valuation = mortgage
lending value
Market value
Valuation check Annual examination
Special supervision Yes. Finanstilsynet – the Danish banking regulator
Protection against mismatching We believe the protection against mismatching is very strict. The so-called ‘general balance principle’
restricts market and liquidity risk
Protection against credit risk –
Protection against operative risk No. Neither a back-up servicer nor a cover pool administrator is stipulated
Mandatory over-collateralisation No
Voluntary over-collateralisation is protected
Yes
Bankruptcy remoteness of the issuer
No, but the assets within the cover pool are exempt from bankruptcy proceedings
Outstanding covered bonds to regulatory capital
–
In the event of insolvency first claim is on:
All mortgages
External support mechanisms In the event of insufficient pool assets proceeds to cover their claim, mortgage bond investors rank
ahead of senior debt holders. In addition, shareholders may extend some other form of support (eg, guaranteeing the ‘top slice’ of the mortgage loans)
UCITS Art. 22 par. 4 compliant? Yes
CRD Annex VI, Part 1, §65 compliant?
Yes