Ny Boligreguleringslov §5 stk. 2: Betydningen for investeringsejendomme og samfundsøkonomien

Simon Vilmer Gilfelt

Student thesis: Master thesis


The Property Regulation Act is a local legislation in Denmark, which makes it possible for investors in the property sector to make short term profits with a limited risk. The act states, that property owners can refurbish the apartments, when a leaser moves out of the apartment. If the refurbishment is substantial, and the costs exceeds a certain amount of money, the annual rent can be adjusted from a so-called cost-based rent, to a market rent. But, in January 2020, the Danish government adjusted the Regulation Act and added several demands to the refurbishment, before it could be possible to adjust the rent. One of the main demands is a hold back period of five years after the refurbishment have been made. This means the cashflow income statement, will first be affected in year five, instead of year one.
Calculations shows, that the difference between a market rent and a cost-based rent, exceeds 100% in some cases and will affect the property cash-flow substantially. When the cash-flows are improved, the fair value of the property will increase, and the rest of the property market will follow due to the increasing demand.
The key figures in the fair value calculation model is primary Yield and WACC. Both figures are impacted from external factors of which the property owners cannot manipulate. The main factors are the interest rate, inflation, tax rates and local legislation adjustments. Especially the last point has shown the significant effect a small restriction can result in a fair value calculation.
The analysis gives the reader a broad insight in the Regulation Act for its benefits and disadvantages. It furthermore reflects on the socioeconomic effects a local legislation adjustment can have, and which sectors that will be affected besides the property sector.
The construction sector has during the last 5 years experienced a high level of demand from the property sector and has a high employment level due to the increasing demand. The demand from the property sector is due to the Regulation Act, and the interested foreign companies who want to invest in Danish properties. If the demand declines from these companies, the employment level decreases as a result, the employments level will decrease to.
Bank sectors have a lot of interest in the property sector, due to the high level of loans to investment companies or to private buyers. If the bank increases its interests or fees, they will cause a higher level of costs in the cash-flows, and by that a lower fair value.
The thesis ends its analysis by identifying the personal factors like; ethics from the leaseholder and the government, the demographical issues, the increasing rent level in the big cities and the choices investors have to make when they enter the real estate business.
Finally, the thesis concludes, that the properties fair value will decrease, and cause a lower employment level in the construction business on a long-term basis.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2020
Number of pages90