Due to extensive migration to growth centres, demand for dwellings in them is growing fast. If the supply for housing is greater than the demand, housing prices rise in the regions that attract migration, while they fall in areas that suffer migration losses. When the price of real estate is tied to demand, location plays a vital role in terms of construction, investment and selling alike.

Currently migration in Finland is focused on the Helsinki metropolitan area, which leads to ever stronger urbanisation in the Uusimaa region and, of course, increased demand for housing. Regardless of the great call for housing, too few dwellings that meet consumers’ needs are being built in the Helsinki area.

According to the national public service broadcasting company Yle (21 May 2015), some 15,000 people a year migrate to Helsinki, Espoo and Vantaa alone, while approximately 7,500 dwellings are built in the area per year – about 2,000 dwellings short of the demand. In addition to the number of dwellings, the current stock of housing does not meet today’s demand. Half the people currently moving to the Uusimaa region and already living in Helsinki are one-person households, while only 37% of the residential buildings in Helsinki are smaller than 49 square metres and 11% are smaller than 30 square metres.


Housing prices rose from 2005 to 2014 by a total of about 35%, i.e. about 3.5% per year. Around the same time, inflation was a little over 2% per year. As well as these, the market is affected by consumers’ purchasing power, the unemployment situation and interest rate level in the region. In the 2000s, unemployment was 8% on average and the interest rate level since the recession that started in 2008 has been exceptionally low.
In summary we can conclude that the state of the real estate market depends on how Finns are doing and where they want to live. We can also say that the Finnish real estate market is divided into three sections:

  1. The Helsinki metropolitan area with its large gains from intraregional migration, good rate of employment and well-functioning infrastructure and universities. These feed people’s purchasing power and the housing demand, which leads to stable or moderately increasing housing prices.
  2. Growth centres with migration gains and a good rate of employment will have to make a great many right decisions now and in the future to ensure that they retain their attractiveness amid increasing competition. If these cities are able to solve these challenges and continue to grow, their housing prices will be on a steady footing.
  3. Localities with migration losses, such as outlying rural areas, will continue to lose residents, which translates as declining housing prices. It is hard to imagine developments that would break this trend.


The dominant urbanisation trend causes people to leave the countryside and move to growth centres, especially to the Helsinki region. As a result of urbanisation, the demand for housing increases in growth centres, and prices rise if there are not enough dwellings on the market. At the same time, housing prices in municipalities and cities with migration losses fall. Clearly, location is crucial.

In addition to urbanisation, real estate prices are affected by the employment situation, purchasing power, the availability of loans and interest rate levels. Real estate investments are also influenced by the quantity and price of new construction.


The location of the real estate, the employment situation, purchasing power, the availability of loans and the interest rate level are key factors contributing to risks. What would happen if the market fell? If real estate prices sank by 10%, ICON would still be making profit. If the real estate market plummeted from its current level by 20%, an ICON investor would still recover their invested capital. If the property market crashed by 50%, which is more than during the 90s recession, an ICON investor would lose about 25–50% of their capital. In such a situation, however, it is probable that all the real estate and housing included in funds would be rented out. Redevelopment would be postponed and funds would not be liquidated until the market turned around.

The interest rate risk of ICON’s funds is very moderate. This is because the properties owned by ICON are already almost self-sufficient before we start their development. During the development work or building there is an interest rate risk. However, this period of risk is extremely short, because redevelopment is relatively fast and the market is unlikely to have time to change significantly during this time.

Building also involves some risks which should be considered. One of these is the plan risk. ICON always carefully investigates beforehand what the plan allows to be built on the landed property in question. If we intend to build something other than the plan allows, ICON will find out whether the changes will require an alteration of the plan or whether an exceptional permit will suffice.

Contractor risk refers to a situation where the contractor goes bankrupt. In RS projects, where the property buyer is protected during the construction stage by law, it is the responsibility of the bank and insurance company to finish the contract together with the developer. In such cases, the project will probably be profitable, but a minor monetary loss is also possible. In other cases, it is ICON’s duty to find a new contractor by inviting tenders, although this would delay the completion of the project and reduce the profit from it.

Builder’s risk, on the other hand, refers to a situation where ICON went bankrupt. However, this is highly unlikely because ICON’s equity ratio is always good before redeveloping, i.e. building a piece of real estate. The bank requires the real estate to be free or almost free of debts before granting a loan. Our projects are almost without exception RS projects, which means that the bank and insurance company are responsible for seeing the construction of the real estate to completion, if necessary. If ICON went bankrupt, the trustee in bankruptcy would sell the real estate and distribute the assets among creditors and fund investors. The first beneficiary would be the one holding the securities (e.g. the bank). If ICON had tax liabilities, the tax authorities would be among the first beneficiaries.