If not now, when?

by Bruce Richardson, Head of Investment Property

Undoubtedly the best time to buy a UK forest was about 20 years ago. Investors in commercial forestry have seen annualised returns on their investment of 9.2% over 25 years[1], and the unit price of a hectare of commercial forestry has increased from £1,461 / stocked ha in 2002 to £9,332 /stocked ha in 2018[2]

Is this growth sustainable? Have we reached the peak?

We have seen a marked increase in forest property prices recently driven in part by improvements in timber prices. Timber prices have softened somewhat this year and may stay soft for a while. The long-term demand for timber looks robust, particularly as new markets for timber and timber based products develop.  

There has been a lot of publicity in recent months surrounding the potential of planting new forests for climate change mitigation. In addition, the new approach to land management based around the concept of ‘natural capital’ will change the way we value our natural environment. We see both as having a positive effect on the way the nation values our forests and woodlands and are actively researching the potential to bring forest owners and environmentally aware investors together for their mutual benefit. 

Creation of new woodland is actively supported by the UK governments (forestry is a devolved matter) with generous grants which can cover a good proportion of the planting costs. Suitable land can be hard to find and the approval process can be tortuous without expert guidance. However, we are delighted to see the noticeable increase in new forests created in recent years.   

The basics of forest investment remain sound. Biological growth of the trees ensures steady timber growth, independent of other markets. The tax treatment of commercial forestry remains favourable at present. Real assets remain attractive to investors in volatile markets. And land retains its value.  

The question to be asked is: Has the investor been priced out of the market? Last year, we saw the average price paid for a commercial forest property rising to nearly £2m, which is beyond the budget of many private investors. However, averages hide a wide variation in prices. Looking at the market today, it ranges from the mighty Eldrick Forest Estate in Ayrshire at over 1,000ha and £9.5m, to the micro woodland offered by Tilhill in Wales at £9,500.  The market caters for all budgets and a wide variety of interests, from purely commercial, to amenity, to environmental. Browse our website to see the vast range of property for sale.

The biggest issue in the current market is an imbalance between supply and demand as new investors clamour for the few properties that are released to market. Good advice is essential to avoid the temptation to overpay and ensure the full potential of the property is understood.  

So, if owning a forest or a smaller woodland interests you, then now is the time to get in touch with our specialist Investment and Property Team who can provide a full end to end service to help you locate, purchase and enjoy this exciting investment.  

[1] MSCI IPD UK Annual Forestry Index 2017

[2] The UK Forest Market Report Issue 20 2018