Forestry would seem a safe investment says Savills report

Uncertainty and doubt may beset other parts of the economy but forestry, often seen as a safe investment in uncertain times, is currently experiencing an unprecedented boom.

Figures published yesterday show that the standing timber sales price has risen 70 per cent in the past five years. Linked to this surge in the end price, transactions involving forestry land have risen some 34 per cent in the past year and are now at an all-time high, contributing to what is an annualised 13 per cent increase since 2003.

But one effect of this boom, according to a report published yesterday by Savills and UPM Tilhill, is that pressure will continue to rise in the conflict of interests between forestry and farming, with farmland being bought up to cope with the demand for more trees.

Looking to the future, the report concludes that investment in the forestry sector is an excellent option during the on-going financial crisis.

Apart from the fiscal advantages arising from capital gains tax exemption, inheritance tax considerations and tax advantages on income derived from timber, there are sports and leisure options arising from owning forestry.

The authors of the report also point to the sector’s green credentials as an increasingly important driver for buyers, with Jonathan Henson of Savills stating that demand for timber products was likely to increase as a result of the support offered to biomass projects by the Renewable Heat Incentive.

In economic terms, the report points out that, with a stagnant economy in the UK and a continuing crisis in the eurozone, woodlands will continue to provide an important diversifier of risk in any investment portfolio for some time to come.

And for those who like stability in a medium to long-term investment, forest prices are low risk and generally not susceptible to short-term fluctuations.

George McRobbie of UPM Tilhill said that optimism was clearly strong and overall the market was rising, backed as it was by clear investor confidence and strengthening timber prices.

The report also picks up on the effect all of this is having on the establishment of new woodland, commenting that new planting in Scotland was now firmly back on the agenda.