Strong woodland market providing hedge against inflation

Purchasing a woodland can act as a hedge against rising inflation rates, according to forestry surveyors, valuers and agents Tustins.

The forestry sector has recorded the strongest property trading conditions ever seen during the past 12 months, the firm said.

See also: Business Clinic: How to navigate woodland market

Its Woodland Market Review covers England and Wales and found smaller commercial listings were selling well, often for more than guide prices.

However, it is taking longer for sales to be agreed.

Co-authors Mike Tustin and John Clegg said: “As inflation becomes an increasing economic factor, buying a woodland property full of growing commodities should be seen as a good hedge against inflation that no other investment class can match.”

Amenity woodlands have reportedly seen a lot of interest from a range of buyer types, including environmental buyers.

The review said that sales of amenity woodlands had become particularly interesting during the past 10 years, with woods that had previously been difficult to trade emerging as good sellers.

Larger commercial woodland properties, valued at more than £2m, had performed well, achieving high returns over that period.

Woodland creation

The combined woodland creation targets total 12,000ha a year in England and Wales, encouraging many buyers to look into woodland generation. However, a long consultation process with government departments was putting some buyers off.

“We are highly enthusiastic about the future of tree planting and the values of those planted areas.

“However, that is assuming we can get over the current bump in the road created by the relevant government departments,” said the report.

“The potential for income streams that outstrip the bare timber values mean that these new properties are likely to have a really solid future.

“Well maintained and well thought-out schemes, with income generating potential early in their life, will become the life blood of the forestry economy and hugely desirable on the open property market.”

Timber sales

Prices of firewood are up by 25% on year earlier levels and seasonal demand is driving further interest.

Supplies of firewood are high currently due to windblown timber following Storm Arwen. However, once this stock is used up, supply is expected to tighten into 2023.

Demand for sawn timber has reduced and stocks at sawmills are high, which has led log prices to drop by £50/t from the peak in early 2021 to £70/t delivered at current prices.

Oliver Combe of Timber Auctions said: “Initial thoughts were that the reduction in supply of timber from Ukraine and sanctions on timber from Russia and Belarus would lead to shortages.

“But this has not been the case as demand has fallen faster than supply and global stocks have built up, leading to price reductions for sawn wood.”