We are one of the largest players in the Finnish log industry with approximately a market share of one fifth and the largest export company on the domestic market. Finland is our main target market and accounted for 74% of our total net sales in 2022. Our other main market areas are Central Europe and Japan.
The combined net sales of the Finnish log house industry in 2020 was approximately EUR 255 million, of which exports accounted for some EUR 48 million. In Finland, the log industry is rather fragmented and competition is tight. In addition to Honkarakenne, there is another bigger player on the domestic market next to which there are a few companies with net sales of EUR 10-20 million, as well as a number of smaller log builders. Key players in the industry in addition to Honkarakenne include, for example, Kontiotuote, Ollikainen and Honkatalot. In addition, traditional house manufacturers are increasingly entering the log construction market. In a tight competitive situation on the domestic market, we aim to achieve a higher profitability level than average, using our brand reputation and economies of scale resulting from export growth.
Honkarakenne's largest export markets are Russia, Japan and Central Europe. Our strategy extending to 2024 aims to strengthen Honkarakenne’s position as Finland's largest exporter of wooden buildings to the world. We aim to increase exports by focusing on and allocating resources to selected market areas, but international business of project nature is also carried out more extensively. There was a turnaround in export development already at the end of the previous strategy period, which gives good preconditions for the current strategy period.
Russia is Honkarakenne’s largest export market. Honkarakenne has been operating on the Russian market for over 25 years and has established a significant position there. In Russia, Honkarakenne is the largest importer of Finnish wood houses, and the only one offering a full range of construction and design services in the segment. A local representative that has been responsible for the sales in Russia for over 25 years has built a strong Honka brand in Russia and the cooperation has already produce over 3,000 log houses and buildings.
Japan is a key export market for Honkarakenne, and in Japan, the company operates through Honka Japan Inc., a subsidiary established in 1991. Over the past decades, we have gained valuable experience in the market and established a position in the demanding Japanese market. In Japan, wood construction is highly valued because of its ecological and health-enhancing properties. The reorganisation of the Japanese subsidiary carried out in 2021 provides a good basis for favourable business development.
In Central Europe, Honkarakenne's exports are mainly directed to Germany, where the company has been operating for over 40 years. The market situation in Central Europe is tight with increased competition and new players entering the market. In Germany, consumers’ standards for house deliveries and services have increased significantly. At the same time, interest and willingness towards environmentally friendly construction is a growing trend, which is highlighted year by year.
Wood is a responsible choice as a renewable and carbon-binding raw material, and the climate and health benefits of wood construction have convinced decision-makers in Finland. In 2016, the Ministry of the Environment launched the Wood Building Programme aimed at promoting the use of wood in public buildings, strengthening regional skills bases in wood construction and promoting exports related to wood construction. The programme aims to boost the market share of wood construction in public greenfield construction to some 31% by 2022 and around 45% in 2025. In 2019, wood construction accounted for 15% of public construction. This development is naturally positive for wood builders and we believe that wood construction will gain a stronger foothold in public building in the 2020s.
Although, as a result of urbanisation, detached houses have lost ground to other forms of housing in Finland in the 21st century, it is still a very desired form of housing among Finns. According to the “Arjen katsaus” survey published by Lähi-Tapiola in August 2020, 62% of Finns consider a detached house as their dream form of housing. In addition, a survey commissioned by Omakotiliitto in 2020 shows that Finnish detached house dwellers are most satisfied with their form of housing.
The popularity of detached houses seems to be high especially among young people. According to Lähi-Tapiola’s survey, the share of those dreaming of a detached house was highest (75%) in the 15-24 age group when comparing the answers of various age groups and in Omakotiliitto’s survey nearly one-half of 18–34-year-olds who do not live in detached houses hope they would live in a detached house within 5-10 years.
The COVID pandemic and new working practices have also increased people's desire to move outside urban centres to areas where detached houses are more common and the possibilities for building detached houses are better.
The main market driver for Honkarakenne is the construction activity of detached houses. Due to urbanisation and the general development on the housing market detached houses have lost some ground to other forms of housing in Finland in the 21st century. According to the Confederation of Finnish Construction Industries RT construction of some 6,600 detached houses started in 2020 while the number was as high as 11,000 in 2011. However, restrictions and new working practices brought on by COVID have led people to seek more spacious homes. According to the Confederation of Finnish Construction Industries RT more new detached houses will be built in 2021 and 2022 than in 2020.
Among raw materials, logs have clearly gained market shares in detached house construction in recent years from other building materials. A survey by Rakennustutkimus RTS Oy from 2020 shows that the market share of industrial logs in the construction of detached houses has increased from 11% to 27% in 10 years and the growth seems to be accelerating. In detached houses, industrial logs have increased their market share by one percentage point per year since 2010 and by 2-3 percentage points in recent years.
Today, one in four detached houses is built from logs. The popularity of log construction is driven by people's increased understanding of the health and environmental benefits of log housing and the desire to influence climate change challenges through your own actions. In addition, the selection of home kit builders is increasingly offering log house kits, which further strengthens the market share of logs in detached house construction.
According to Statistics Finland's Building and dwelling production statistics, the cubic volume of free-time residences started to grow in 2020. The growth trend continued as strong in 2021, as in January-June 20% more building permits for free-time residences were granted than in the corresponding period of 2020. In the longer term, the construction of holiday homes depends to a large extent on the development trends of people’s, especially the younger generation’s, leisure preferences.