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26
Aspects of Land
Spring / Summer 2019
FORESTRY
T
he price for softwood,
which accounts for more
than 90% of the UK’s
timber production, is at
a 30-year high. Parcels
regularly sell for £50 per
tonne and even as much
as £70. This is a 50% rise in 2018 alone.
“There’s no reason for timber values to
stop rising, providing demand for wood
remains,” says James Adamson of Savills
Forestry. “Wood has enjoyed a remarkable
return to favour. Thirty per cent of new
houses are timber-framed and renewable
biomass energy accounts for around 20%
of the UK’s timber harvest.”
But forest ownership is not for everyone.
It takes years of growth before a tree is
ready for felling and the income derived
is a one-off, making forestry an inefficient
income investment unless you have lots
of trees. Scale is therefore important for
anyone seeking a regular income.
“A 100-hectare wood might offer
three fellings over 50 years, providing an
income once every 15 years or so,” says
James. “However, 1,000 hectares could
provide income every 18 months, while
10,000 hectares would enable multiple
fellings annually, providing a sustained
income. Consequently the investment
market is increasingly dominated by
repeat buyers expanding their holdings –
typically funds and family trusts.”
Even without felling, forested land
provides capital growth because its value
For the past 20 years, capital prices for forested land have risen
steadily, making it a very lucrative – if long term – investment
accumulates through the trees’ growth;
the nearer to harvest, the higher the value.
Forests, therefore, represent a reliable
asset for small-scale investors, who can
realise their investment at any time
through selling the property.
It is also a highly tax efficient investment.
Income from the sale of timber is exempt
from income tax and corporation tax,
while growing timber (but not the land
it grows on) is exempt from capital gains
tax. As “business property”, commercial
forests attract 100% business property
relief from inheritance tax on the total
value of land and trees; typically £15,000–
£25,000 per hectare.
Underpinning this favourable taxation
are targets to increase forestation
Growing returns