Speaking at the launch at the Institute of Directors in London, Crispin Golding, woodland investment adviser at UPM Tilhill, said in the year to end September 2012, large properties with high yield forests, in particular, had leapt in value.
“That shows what people want – they want timber,” he said.
Over the past 12 months, a combination of strong demand for forests, and the high quality and maturity of woodland on the market, resulted in an increase in the average sale price of 49% per stocked hectare.
Strong demand also created a highly competitive market, with sale prices exceeding asking prices by an average of 32%. Land prices were up nearly 50% to £6,920 per hectare.
The IPD UK Forestry Index showed a return of 34.8%. As predicted, said Jonathan Henson of Savills, UK timber prices were not supported by the exchange rate to the same extent they were in 2011.
“However, true to form, the sector has not been susceptible to short-term fluctuations. In fact, global economic woes have only highlighted woodland as a sound medium to long-term investment and it has continued to outperform most alternatives,” he said.
“The significant tax advantages derived from timber, including the potential to benefit from Inheritance Tax savings and Capital Gains Tax exemption, are among the sector’s strengths. The future role that biomass is forecast to fulfil in helping to meet energy requirements aso continues to increase investor confidence in forestry,” said Mr Henson.
UK timber consumption was down 20% on 2007 but land value continued to rise, he added.
Alastair Gemmell of Savills said forestry had been given “phenomenal performance” during the recession and had proved to be a “very good hedge against inflation”.
While poor quality forests were harder to sell, investors were competing fiercely for quality woodlands. “They’re bidding hard and strongly for the best woodlands which shows they’re thinking about it hard and have optimism in the future,” said Mr Gemmell.
