Housing, Wealth, and Spatial Inequality in Denmark: Linking House Prices and Wealth Disparities Through a Hedonic Index Approach

Abstract

This thesis examines the uneven distribution of house price growth across Danish municipalities from 2010 to 2023 and its role in shaping spatial inequality. Using transactional sales data and a hedonic regression model, a quality-adjusted house price index is constructed for all 98 municipalities. The results reveal significant disparities, with urban areas, especially in Region Hovedstaden, experiencing much higher price growth than rural and peripheral areas, contributing to widening wealth gaps. To interpret these patterns, the thesis draws on urban economic theory, applying the Rosen-Roback framework to assess whether differences in local income and amenities compensate for rising housing costs. While local incomes have partially offset higher prices, house price growth has outpaced income, highlighting the importance of amenities in location decisions. Finally, the study considers housing as an investment asset. Municipalities like Gentofte have benefited from both rising incomes and substantial wealth accumulation. The combination of high quality-of-life (QOL) indices and above-average net wealth in these areas suggests that households sacrifice less to reside there, compared to, for instance, Copenhagen Municipality. In Copenhagen, despite high QOL scores, below-average net wealth indicates that residents bear a greater sacrifice to live there than those in places like Gentofte. In contrast, low-growth municipalities show negative QOL indices and below-average net wealth, indicating that although house prices may be low relative to income, net wealth remains an important factor to consider.