I have noticed that property prices near popular areas are much higher than what could be deduced by construction costs only. For example, in Finland, I can find a new 35.5 square meter row house in Oulu for 86600 EUR. This is about 2440 EUR per square meter. Based on my understanding, this 2440 EUR per square meter is about the cost of constructing a new house.
As far as I know, salaries in popular areas are not much higher than in non-popular areas. Also, for example, the Helsinki region is near Estonia, a source of cheap labor. So, based on this, the cost of constructing a new house in Helsinki should be about the same as in Oulu. So, the cost of a new house on leased land should be 2440 EUR per square meter near Helsinki (but the total cost of ownership would be higher because of the rent payments for leased land).
However, I found that a new 34.5 square meter apartment in leased land costs 148695 EUR in Helsinki. This is 4310 EUR per square meter.
Also, a city near Helsinki, Espoo, has plenty of unbuilt land. As a matter of fact, there is agriculture in Espoo! This all shows that there should be plenty of land to build apartment buildings on. Thus, a house on non-leased land should cost about 2440 EUR per square meter, because a fair price for land on areas where there is plenty of land is approximately 0 EUR per square meter (well, it is actually the opportunity cost, but it is very close to zero).
However, a 35 square meter new apartment on non-leased land costs 169490 EUR in Espoo. This is 4840 EUR per square meter.
I don't understand how these prices can be so high. Surely, the market economy means that when new houses can be sold for 4310-4840 EUR per square meter and the land should be practically free, there should be a lot of people trying to earn profit by constructing houses and paying 2440 EUR per square meter and selling them for 4310-4840 EUR per square meter. This should continue until there are so many new houses in the market that the price falls to a bit above the construction costs.
So, what explains these high property prices in popular areas?
I recall a quote "The market can stay irrational longer than you can stay solvent", which kind of describes this situation. The high property prices here are not something which has occurred only in the very recent past; the situation has been on for more than 10 years.