Another Robust Year for Forestry

ForestryTHE AVERAGE price of commercial forestry on the market rose 23% over the last year, according to the latest sector statistics.

The 21st edition of the UK Forest Market Report, produced by Tilhill Forestry and John Clegg and Co, outlined a positive outlook for the ‘robust’ market in its annual analysis, and highlighted its ‘powerful attraction as an investment asset’.

That year-on-year rise in average forestry values takes it to £11,478 per stocked hectare, pushing a 21% increase in the total value of the forestry market.

Commercial forestry transactions worth £126.5m were completed in the past year, with14,235 ha of forestry traded in 2019, encompassing 81 forests, at an average cost £1.56m.

69% of properties sold above their guide price with 14% of properties selling at more than 150% over guide. Scotland held the largest share of those forestry market transactions, with 78% of recorded sales).

Speaking for Tillhill Forestry, Peter Whitfield said: “We have seen a continued upward trajectory in average forestry values, which rose by 23% over the past year. However, it must be stressed this is a volatile figure which is in part a reflection of the excellent quality of the forests which came to the market this year. Deviations in the quality of properties sold distort the comparison and, if we were to compare like for like examples, we would probably see something closer to a 1012% rise. That said, there is clearly a genuinely strong uplift in the market.”

An ‘interesting selection’ of properties came to the market, noted Tillhill – in Scotland, where 78% of recorded sales took place, five properties sold above the £5m mark while 15 properties sold below £500,000.

Investing in Forestry

Clegg and Co director Fenning Welstead said: “Our report for 2019 shows that forests have continued to rise in value. With the softening of timber prices this year, it might be thought that forest property values should follow suit. This is not happening and we believe that this is a direct reflection of the trend towards renewable resources and a move to a low carbon economy.

“We believe the rise in land values reflects a desire to have such a fundamental asset as part of an investment portfolio. Ownership offers opportunities for alternative land uses; for example, renewable energy and commercial forestry crops are a popular blend. Additionally, with a potential carbon tax in development there is the possibility of an annual income for sequestering carbon.”

Much is being said about the ability of tree planting to help mitigate climate change and the report predicted that this will be a driver of future policy. But while interest in establishing new forests is high, it is really only active in Scotland. It was ‘sufficiently confidence inspiring’ that strong, competitive bidding for suitable land was lifting prices to new levels – but the momentum needs to spread to England and Wales to achieve real success.

The continued strength in the mixed woodlands market was also demonstrated in the report, which comprised 44 properties, representing about 2,250 acres offered with a total guide price of £9.252m. The total selling price was £9,603m, around 4% over guide.

These types of woodland offer ownership opportunities to a range of investors. As the wider societal and environmental values that should be assigned to woodland through carbon, water quality, flood mitigation and biodiversity start to be recognised, it is expected that this market sector will attract a new class of environmentally-minded investor. Although prices have not risen as quickly as the productive conifer market, they still compare favourably and many remain more affordable for the smaller investor.

“We can expect an unsettled few years ahead both politically and economically,” said the report. “In this environment, we can see the value and security of real assets that continue growing regardless of political uncertainty. This, along with a continued political support for forestry, aligned with a new impetus for woodland creation driven by growing climate change concerns, makes us optimistic about the future.”

Source: The Scottish Farmer