But the trend became self-fuelling. In the expectation that prices would continue to rise, new homes were purchased before the old ones were sold. Property became an object of speculative investment. Driven by expectations, combined with the economic upswing, prices of single-family and terraced houses soared by almost 25 per cent within one year from early 2005.
The increase was even stronger in the Copenhagen area. A hike of that magnitude cannot merely be explained by the underlying economic conditions. Expectations also played a role. The rising property prices added fuel to the upswing. Home equity increased, and consumers gained extra purchasing power. We witnessed a strong expansion in construction activities, with clear signs of overheating.