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Woodland and forests a safe haven for investors in turbulent times
Forest owners in the UK have evidently made shrewd investments in land and trees. Findings, out today (26.11.08) in the 2008/09 Forest Market Report from UPM Tilhill and Savills, reveal that plantation prices have on average more than doubled in the last five years.
The Report, an aid to buyers and sellers involved in the commercial forestry market, provides an annual snapshot of the UK commercial forestry market on properties larger than 25 hectares.
This year’s publication reveals:
• Investors owning woodland over the last five years will be enjoying capital growth of 125-150%
• Average plantation prices have risen more than 100% in the last five years with headline growth at 52% since 2006
• Like for like prices have increased 10-20% in 2008 compared to 2007.
"In a year which has seen oil prices reach record levels, the economy slip towards recession and the nationalisation of three major banks, forest owners are really bucking the trend,” said Simon Hart, Woodland Investment Adviser, UPM Tilhill. “The report shows how forests and woodlands can be seen as a safe haven in these uncertain economic times.”
This year, the average plantation price per hectare reached £3,596, continuing the long term trend of rising values for woodland. The average size of forest sold was up 10% on 2006 figures at 135 hectares, this represents a total market value for 2007/08 of £24.4 million. There are signs that woodland owners, who have seen strong rises in value and optimistic forecasts, are taking a long term view with no rush to sell, as transactions were down on 2007 levels. The Forestry Commission’s announcement that it will bring woodland property to market next year is expected to boost these figures for 2009.
The report also highlights the growing biomass market which is beginning to have a positive impact on woodland values. Wood fired plants at Shotton, Teesside and Lockerbie, alongside new projects underway such as Tullis Russell in Fife and Drax in North Yorkshire, are beginning to generate a real and sustainable source of income for woodland owners.
Forest investment has not escaped the downturn in construction and associated falls in timber price. The result is a reduced demand for coniferous standing sales and softwood sawlogs as many sawmills and processors reducing capacity. Although this may affect the value of mature woodlands with immediate fellings the picture for younger woodlands remains optimistic. In addition, respite comes from a weak pound making imported timber expensive; alongside demand for pulp wood exports to Scandinavia and Finland remaining constant.
The 2008 figures also show a rise in value of smaller woodlands with the ten woodlands sold in the smallest categories up 57% from last year, selling for an average value of £200,000. Demand here remains intense with prices highest for woodlands close to centres of population and with high amenity value.
The tax position for commercial woodland ownership remains constant, and is an important factor in the freehold market, especially for new investors and their advisers.
“We approach 2009 with an air of optimism about land ownership and timber as a commodity,” said Ewan Berkeley, Savills. “Capital growth, together with Inheritance Tax mitigation, remains the primary reason for woodland purchase. Though it is expected to be a cautious market in 2009, good buying opportunities will exist, but careful evaluation is required before making a purchase.”
For a full copy of the Forest Market Report 2008/09, log on to www.upm-tilhill.com, or www.savills.co.uk|||
To open an e-book of the Forest Market Report please click here|||.
For all forest buying and selling enquiries contact UPM Tilhill.
Scotland: Simon Hart, 01786 435000
South Scotland and North England: Jason Sinden, 01387 711211
England and Wales: Guy Warren, 01524 272249 or Crispin Golding, 01844 279911
Or contact
Savills: Ewan Berkeley - 01356 628600.
-ENDS-
Notes to editors
For further information please contact:
Ruth Roy
01892 861008/07771 940494
ruth.roy@upm-kymmene.com
Forest Market Report is sent to UPM Tilhill and Savills clients and is freely available to the media. This is the only published research of its kind in the UK and illustrates short-term market trends. It complements the Investment Property Data bank (IPD) Forestry Index which charts long-term financial returns from forestry. The analysis for the report is based on UK data over the year to 30th September 2008 and the previous seven years. It examines forests in excess of 25 hectares, (predominantly coniferous), which typify the investment market. The survey includes all known/recorded public and private sales of commercial plantations of over 25 hectares.
UPM Tilhill is the UK’s largest timber harvesting company, harvesting over 2.0 million tonnes per year, and is the market leader in UK forest management. The company provides a full range of consultancy and contracting services to the forest owner and forestry investor. In 2005, the company received a Queen’s Award for Enterprise: International Trade. Further information is available on the company’s website at www.upm-tilhill.com.
Savills plc is a leading international property services company with a full listing on the London Stock Exchange. The company has undergone dynamic growth in recent years establishing itself as a powerful player on the international stage, with offices and associates throughout the UK, Europe, Asia Pacific and Africa.