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Forestry: safe investment in uncertain times

A stagnant economy in the UK, and the continued crisis in the Eurozone, suggests that woodlands will continue to provide an important diversifier of risk in any investment portfolio for some time to come

The Forest Market Report 2011, which was launched in London on 29 November and Edinburgh on 30 November, says the strength of the forest market over the past 12 months will be no surprise to those in the industry who have long believed in the potential of the underlying investment returns. As a medium to long-term investment, forest prices are low risk and generally not susceptible to short-term fluctuations.

A stagnant economy in the UK, and the continued crisis in the Eurozone, suggests that woodlands will continue to provide an important diversifier of risk in any investment portfolio for some time to come.

George McRobbie, Forestry Operations Director for UPM Tilhill, said: “2011 has seen a welcome lift in the market with impressive values being achieved throughout Great Britain across a wide range of property types and values. We recorded a surge in forest values with an average of £4,650 per stocked hectare being attained, the highest level since our survey started and 34 per cent (£1,174) up on 2010. This is equivalent to an annualised increase of 13.7 per cent since 2003. Optimism is clearly strong and overall the market is rising, backed by clear investor confidence and strengthening timber prices.”

Jonathan Henson, Director for Rural Savills, added: “Demand for forestry remains high. IHT considerations, Capital Gains Tax exemption and tax advantages on income derived from timber have always attracted buyers, as do the opportunities for enjoyment, sport and leisure. However, the sector’s green credentials are becoming an increasingly important driver for buyer demand, particularly in the light of both UK and Scottish government’s renewable energy targets. Woodland properties frequently offer opportunities for wind turbines and hydro-electric schemes, while demand for timber products is likely to increase as a result of the support offered to biomass projects by the Renewable Heat Incentive.”

The IPD UK Forestry Index shows a return of 20 per cent for the year to December 2010 and the Forestry Commission indices show the coniferous standing timber sales price up by over 70 per cent in the five years to September 2011. The current levels of growth have taken place in spite of an ailing construction sector. Looking to the longer term, as economies start to recover and development activity increases, demand for timber both as a fuel and construction material can only increase.

In markets such as this one, Mr Henson stresses, where demand is high and supply is restricted, investors need excellent market awareness and to be in a position to move quickly when opportunities arise.

As a leading rural property specialist Savills has considerable experience in handling the purchase and disposal of rural property, and maximising returns from forestry investments throughout the UK. The company’s rural team helps forestry owners realise the potential of their assets through diversification into a wide range of activities including renewable energy, leisure and sporting pursuits.

With its seedling to harvester management service, UPM Tilhill works with companies or individuals who are considering investing in forestry. The company’s team of Woodland Investment Advisers helps customers buy, sell, manage or harvest timber and get the best from their forest regardless of the size or location.

For a full copy of the Forest Market Report 2011 log on to www.upm-tilhill.com or www.savills.co.uk

by S. C.
05 december 2011, Food & Fun > Business

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