On behalf of everyone at 2hWealthcare, may I wish you a Happy New Year. As we said in our pre-Christmas markets update, there are reasons to be optimistic about 2021, chiefly thanks to the rollout of coronavirus vaccines. It was wonderful to see the ‘Oxford vaccine’ make its debut this morning.
In this article, I want to focus specifically on the prospects for one of our favoured alternative investments, that of forestry. A number of our clients are invested in managed forests for reasons you about to read. If you would like to discuss how forestry might fit into your portfolio, please get in touch.
A few weeks ago, I attended via Zoom the 2020 UK Forest Market Report, presented by Tilhill Forestry and John Clegg & Co. I was delighted to learn that it had been another impressive year for commercial forestry. The two key findings that jumped out of the report were:
- 39% year-on-year rise in average forestry values to £15,962 per stocked hectare
- 58% increase in the total sales value
There is a link to the full report at the end of this email.
Bruce Richardson, lead analyst at Tilhill, said 2020 had been an “astonishing year”, coming on the back of what was an excellent 2019 when average values increased by 23%. What stands out in 2020 are the number of new investors in the market, the high interest in younger forestry plantations and the huge rise in prices paid: Two-thirds of all properties sold achieved an average of 48% above the guide price.
This level of demand and increase in prices reflect investor confidence in the future of the commercial timber market in the UK.The outlook for UK forestry remains extremely positive, underpinned by significant and growing demand from the construction industry, a shortage of supply and the huge potential for income for sequestering carbon.
Most of our clients invested in forestry have done so through syndicated forest funds managed by FIM Limited, now part of Gresham House Asset Management. These benefit from economies of scale, professional management, lower entry costs and very favourable tax advantages, including exemption from Inheritance Tax once held for two years. Over the 10 years to the end of March 2020, the IPD UK Forestry Index/GHAM timber index has increased at an annualised rate of 18%.
If you would like an update on your forestry investment or further information as to how you can invest, please get in touch.