Forestry valuations grow

Buying up forest property is a different kind of property investment and can be traced all the way back to when Tarzan and Jane first settled down seventy years ago.

Although they might find it a little crowded now as investors have turned to this sector as an area that has stayed steady in an otherwise chaotic market place. In the U.K  for example, while values may  have declined slightly in recent months, the sector has not been hit as hard and,  according to the latest Forest Market Report from UPM Tilhill and Savills demand from timber investors is still increasing.

Unlike housing values, which have plummeted, forest values have remained insulated from the general recession,  indicating a capacity to hold value on the strength of confidence in the increasing demand for timber and forestry products. Whilst not at the record highs of previous years, the figures from 2009 show a rise in sales in terms of transactions and area value. This year,  the number of forest transactions increased significantly with 88 forests bought compared with 50 in 2008.

In Scotland the Forestry Commission have reported a strong in interest from forestry  investors wanting biomass rather than timber. This interest reflects the growing biomass market, where demand is projected to far outweigh potential domestic supplies.  This is also good news for the Scottish Government since they announced their Renewables Action Plan last month.

In this year alone the market for biofuel and timber has doubled in the UK to £48.2 million. It shows that there has been a shift in importance on mixed plantations targeting both traditional and newly developing timber and biofuel markets.

Crispin Golding from Woodland Investment Advisor, UPM Tilhill, has estimated that in 2009 an additional 750,000 tonnes of biomass energy capacity (which is equivalent to almost 9% of the annual UK softwood harvest) is expected to come on stream in Scotland.

‘Investors not only appreciate the timber aspects of forests but also the wider credentials of forestry, for example as a source of sustainable bio energy, a green asset and a place to sequester carbon,’ added Golding.

It also doesn’t hurt that values per hectare have generally followed the trends set in 2008 with the 25-50 hectare category maintaining its outstanding value at almost €6000 per hectare, this is up 6% on 2008 and 40% up on 2007.

The area sold recovered to 14,600 hectares, which is more than double the area in 2008 and the average property sizes have also increased to 166 hectares, up 20% on last year.

The general economic slow down has not slowed this sector down although it has managed to squeeze the timber prices and all sectors of the market. In particular construction timber for new build housing where demand has diminished due to the recession. However on the positive side of the coin exchange rates have helped keep the domestic timber supplies competitive.