A new study out of Aalto University in Finland shows that building with wood can be economically feasible. The research team analyzed statistical data from real estate sales in the Finnish capital of Helsinki and two suburbs between the years of 1999 and 2018. Of these, timber-built homes made up 2.23% of cases. The findings reveal that multi-storied buildings made from wood sold for an average 8.85% more than those made from other materials. 

The study derives from the challenge of increasing urbanization and the need to meet the demand for new residential developments. Simultaneously, the building and construction industry is accountable for nearly 40% of global energy-related CO2 emissions, according to the United Nations Environment Program. As cities across the world set ambitious carbon neutrality goals, finding ways to meet this demand while cutting construction emissions is extremely important. One approach and challenge is to use more environmentally friendly materials as main building structures. 

The research team, consisting of Ilmari Talvitie, Jussi Vimpari, and Seppo Junnila, turned to wood after examining research that claimed that wood-based structures could decrease construction-related emissions by half. Additionally, studies found that cities could become carbon sinks with the increased presence of wood. However, previous research has pointed to perceptions of higher costs in wood construction, and until this study, there have been limited results on the material’s cost efficiency. The study aimed to uncover this research gap by examining the economic feasibility of wooden structures in Finland, guided by this research question: Do wooden apartments have a price premium in the Helsinki metropolitan area? 

Due to the many factors that impact price, the researchers used regression analysis to single out the effect of other variables. The results of the study found a positive price impact for wooden apartments in the Helsinki metropolitan area. As stated in the research manuscript, “The positive price premium of 8.87% for wooden dwellings presents a direct financial benefit for the city and private developers in the capital city of Helsinki. Based on the results, this study suggests the city of Helsinki to increase the consumption of wood in construction.”

Price differences between wood and other construction materials were not seen in the suburbs studied. The researchers believe this may be due to the fact that timber-based construction in Helsinki occurs in cheaper-than-average areas, where people may be more willing to pay for the eco-friendly material. However, they argue that the two suburbs should consider wooden construction as a means to offset emissions. 

“Our previous research shows that if you buy a flat you're more concerned about its environmental footprint than if you rent. An owner typically invests more in ways to improve performance, like energy-saving options. This principle seems to hold true here: buyers are willing to pay more for an eco-friendly choice, even if they can't afford to live in the most expensive neighborhoods of the city,” says Seppo Junnila.

According to a news report on the study by Aalto University, Finland, while initially hesitant to invest in timber construction, sees its potential as the Ministry of the Environment aims to have 45% of new multi-storied buildings constructed with wood by 2025. However, as noted by the researchers, legislation alone isn’t enough to meet these goals. “We need people to want to live in these kinds of buildings and construction firms need to see them as a business opportunity,” says Junnila.

Based on these findings, a shift to wood can be a viable approach to meeting environmental goals while being economically feasible. Further research is needed, though, to see its effects on the economy and environment in other locations across the world.