Forest market enjoys most active year

This year’s Forest Market Report, launched jointly by Savills and UPM Tilhill states that the UK’s forest market has never been more active than in the last 12 months, with Scottish sales leading the way and significant growth in Wales.

Some 50% more forestry property was traded in the last year compared to 2012, to the value of £97.3million, 8.5 times the value traded in 2000. This made 2013 a record year, both in the total value of the market and its unit price.

As in the past, most of the sales were in Scotland (68.9% by value) but there was a significant increase in Wales this year with 16% of sales taking place there compared to just 4% in 2012.

Also at record levels is the average value per stocked hectare which is now at £7057. This has given an annualised average growth since 2002 of 15.4%. The average value of a property is up 29% on 2012 values to £1,231,000.

Jonathan Henson of Savills said: “While values of properties larger than 50 hectares have dropped in England, prices in Wales are now outperforming English prices for the first time.

“As the year progressed, an improvement in the economy led to early signs of growth in the sector. This was strongly supported by a number of forestry investment funds and high net worth individuals who have been active at the top end. Both sectors of the market have been aggressively bidding for good quality spruce forests which offer reasonable scale and access to timber markets.”

Henson added that, at the start of the global financial crisis back in 2007, few people would have been bold enough to predict the extraordinary performance of the UK forestry sector which, according to the IPD UK Forestry Index, is showing an annualised total return of 17.7% over the past five years and 16.3% over the past decade.

George McRobbie Managing Director of UPM Tilhill added: “All in all it has been another tremendous year for forestry property market. The 50% increase in the value of commercial properties traded in England, Scotland and Wales compared to last year is staggering and proves there is huge interest from investors and private individuals who recognise the value and potential benefits of owning forests.

“We are now looking forward to an increase in demand for timber for construction and biomass and the knock-one effect on timber sales particularly from those with a combination of processing and energy needs.”

Henson said the rapid rise in the capital values of woodlands was initially driven by investors seeking a secure asset in which to shelter cash. The potential tax reliefs, coupled with a surge in interest in renewable energy opportunities and long-term optimism in timber prices, fuelled interest in the sector. Existing investors looking to increase their woodland holdings, new investors entering the market for the first time, and large forestry investment funds acting for pools of investors, all led to a surge in demand.

He said: “As the wider economy continues to recover, alternative asset classes (such as equities, residential and commercial property) may become relatively attractive, and the number of private investors entering the market may peak in the short term. Overall we continue to be optimistic about timber prices.  The significant tax advantages derived from commercial forestry, including the potential to benefit from significant IHTsavings and Capital Gains Tax exemption, continues to point to a bright long term future for forestry.”

The report praises initiatives like “Grown in Britain”which have been very positive for the forestry industry in promoting the array of quality products generated from productive woodlands. It has already secured long-term commitments from over 30 UK companies in the retail, DIY, builders’ merchants, building contractors and building sectors to preferentially procure products from UK woodlands and forests. The total buying power of these companies is in excess of £50billion per annum.

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