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Mr Lambert noted that “for much of the year (2024), some of the institutional players who were voraciously hungry in 2021 and the first half of 2022 have found it harder to refill the piggy bank, due to interest rates and investor hesitancy. When valuing properties for sale, purchase, family transfers, for lending institutions, funds or individuals, interest rates will, of course have a bearing. Over the last 12 months we have seen market discounted cash flows suggest returns of 6-10%, which is a healthy 1-5% above base rates.”
Mr Lambert referred to north England and south Scotland as “the forestry golden rectangle” of productive upland sites with good ground and growing conditions, a large resource of competent forest managers and contractors, and, crucially, easy access to established hi-tech timber markets. As “a broad rule of thumb” he ranks the central bank of Scotland in second place, Aberdeenshire and Argyll “probably in third” and north of Inverness “generally in fourth place”. Mid-Wales, he said, is a premier division location – “the platinum corner” – where timber price often outperforms that of Scotland.
When it comes to the best time for investing, Mr Lambert said that timber quality is a key indicator. “Generally, in all property asset classes, good quality means you will always be able to get out,” he said. “If something is cheap there is usually a reason. It’s a classic indicator – when ‘rubbish’ is making a lot of money you are probably close to, or at the top of the market. It really doesn’t take a maths scholar to understand that if you have a mature crop standing at only 200 tonnes to
the hectare, with poor quality timber worth £30 per tonne, or a forest with high quality timber worth £60 a tonne standing at 600 tonnes to the hectare, the range in values between the two crops is £6,000 per hectare as opposed to £36,000 per hectare. Plus, the value of the land. Both sites will have taken 35-40 years to get there but the higher quality crop is worth 600% more than the poor one. It’s worth getting it right. “At the time of planting it is critical that management has to be at its most focused for three or four years, and similarly at the time of timber marketing. Decision making at these times can make or break the investment.” Regarding woodland carbon, which can create additional value to young crops, Mr Lambert said that trading of woodland carbon had become clearer and more commonly understood in the last 12 months and purchasers generally have good visibility on market price. “However, we need to get better at paying for the value of carbon while it is still attached to young crops and land,” he said. The data and analysis in the 2024 FMR reflected the 12 months prior to the October 30 Budget, which presaged major changes to the taxation landscape and, potentially, to commercial forestry land ownership. “[With] £40bn-worth of tax increases, however you slice it the British population is now poorer than it was pre-Budget,” said Mr Lambert.
“In the forestry world, taxation was adjusted with a reduction in relief for business and agricultural property,” he continued. “Currently, if an individual owns a commercial forest and runs it as a business for two or more years, upon death there is no inheritance tax (IHT) paid by the beneficiary.
From April 2026 the first £1m will remain IHT free, but then the relief has been reduced, resulting in 20% IHT paid due on the balance. “On first reading this is disappointing, but name me another investment where IHT is free on the first million pounds and then only charged at 20% rather than 40% on the balance.”
Mr Lambert said that Goldcrest had already seen an increase in enquiries from individuals looking for an investment up to and slightly more than £1m.
“Quality commercial woodlands and forests remain fundamentally highly attractive investments with tax efficient advantages an addition [timber remains free of income tax and capital gains tax],” he said. “I don’t believe the results of the Budget will bring more properties to the market but possibly, as stated, it will result in more purchasers, certainly at the lower end of the values. I am quite intrigued to see how the next 14 months up to April 2026 might pan out. “What I am confident in is the fundamentals. A land-based, tangible investment – they aren’t making any more land – growing a global commodity that is in short supply. A developing world that consumes more timber as living standards improve. A requirement for increased housebuilding in the UK – we’re told it’s going to increase in England by 14% in 2025. A huge reliance on timber imports and current timber pricing which to me looks remarkably inexpensive. “Yes, capital values are back last year and this. The market has rebalanced. But I believe there is value out there to be had. To me the future looks robust and exciting. So, do not wait to invest in forestry, invest in forestry and wait.” ■
Above: The availability of land for afforestation has continued to shrink
www.ttjonline.com | January/February 2025 | TTJ
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