A resurgence in firewood and timber prices combined with strong returns for investors is leading to heightened interest in UK woodland and forestry.
Commercial forest owners have seen the value of their asset rise exponentially in the past 10 years.
And, over the same period, some woodland deemed unworthy of maintenance is now financially viable again.
“Forestry has made a total return of 18.4% a year in the past decade,” says Jason Beedell, research partner at Strutt & Parker.
“To put that in to context, UK rural property made a return of 11.3%, residential market lets produced 9.2% and commercial property was 5.7%. Most of that return has been driven by capital growth.”
Standing prices of hardwood for firewood range from £30/t to £40/t – double what they were 10 years ago, according to agents John Clegg & Co.
Meanwhile, conifer prices for sawing have also increased to between £20/t and £35/t.
This, combined with favourable tax treatments, is leading some farmers and woodland owners to consider bringing their trees back in to management.
Estimates are that there are over 1m hectares of unmanaged trees in the UK, predominantly in south-east England situated on large estates.
Brexit forestry boom?
In the past decade the value of woodland and forestry have grown from £2,000/ha to £8,000/ha, according to Fenning Welstead, partner at John Clegg & Co.
“From 2002 to 2008 there was a realisation that woodlands were undervalued, and then in 2008 we saw the financial crash which led to investors rushing to real assets at the same time as a weaker pound made UK timber more valuable.”
- All income from timber is tax free.
- Capital gains tax is only applicable to the value of the land that the trees grown on, not the physical trees, providing the woodland is being commercially managed.
- Managed woodlands also qualify for inheritance tax relief.
A similar “rush to quality” is expected post-Brexit, and Mr Welstead said there are already indications of increased interest.
“Deals have been closed since Brexit which suggest that demand for forestry and land is robust. Arguably there has been stronger interest from continental purchasers whose euros now buys more pounds.”
While commercial forestry continues to perform well, depleted returns from agriculture is leading farmers and landowners to take advantage of planting incentives by establishing trees on marginal land or newly acquired plots.
Plots of woodland throughout Scotland are also selling well and can command between £1,000/acre and £5,000/acre depending on age, species and location.
Gordon Brown, head of CKD Galbraith’s forestry department, said: “There are many reasons why farmers and landowners are increasingly engaging in this concept, especially where less productive farmland can be utilised for tree planting as opposed to crops which would offer a lower yield.
“Woodland can be created as a source of fuel and it allows for greater biodiversity where an abundance of plants and wildlife can thrive.”
Sales of English woodland and forestry reach top prices
One of the largest privately owned woodlands in Surrey has sold for well over £4m – significantly higher than its £3.85m guide price.
Shere Woodlands covers 732 acres in a single block near Guildford and was purchased by a private individual.
“The viewings we had were from high net worth and high profile individuals as well as some corporate institutions looking to expand their portfolio, but the main interest was driven by tax planning,” said Matt Sudlow, partner at Strutt & Parker.
Shere is commercially managed for timber extraction with species including Corsican and Scots pine, Douglas fir, Japanese larch and various mixed broadleaves and conifer stands.
“The appetite for woodland is extremely high in the south east and two of the under bidders in this sale are desperately looking for other woodlands to invest in. The demand is great.”
July also saw the sale of large and small woodlands in Carlisle. About 24 acres of woodland at Hoathwaite, near Coniston, sold at auction for nearly £5,000/acre.
Formerly a commercial softwood plantation with high amenity value, the site was deer fenced in preparation for restocking and split into three lots.
Plantings included established and young broadleaf trees, primarily oak, and early to mature conifers, dominated by Sitka spruce.
Mark Barrow, chartered surveyor at H&H Land and Property in Kendal, said: “In the past five years, the value of woodland has increased by around 50%.”
At the same sale, a one-and-a-half-acre block at Mill Brow Lodge sold for £44,000 – more than four times its guide price.