DESPITE GENERAL uncertainty in the property world surrounding the potential effects of Brexit, the UK forestry market has continued to demonstrate a degree of resilience, posting another year of strong performance.

According to the latest findings published in Savills Spotlight on the UK Forestry Market, 2017 saw the total value of the forestry investment market increase by 24% to over £112 million compared with around £90 million in 2016. The value of forestry transacted during 2017 was 25% higher than the medium term average, although significantly lower than the £146 million in 2015.

Despite this large increase in the overall value of the market, the total area of forestry sold across the UK actually fell to just over 18,000 hectares during 2017 representing a reduction of -8% on the 2016 forest year, but was in line with the medium term average. Contraction of the market area, coupled with an increase in the overall value traded, resulted in rising average values.

Domestic timber is underpinning the forestry market and continues to drive value in the forest property sector, supported by a weaker sterling and the increasing demand for wood in biomass and construction,

Savills' research reveals average productive values across the UK rose by 20% to £9300 per hectare. This significant growth follows a fall in average values during the previous year, although in 2016 this was largely due to the location of properties traded, with over 80% north of the Forth-Clyde canal.

In 2017, gross values grew by 19% to £7300 per hectare. On average productive values were 27% higher than the average gross value and the average unproductive area was 32% per property.

Savills head of forestry investment, James Adamson, said: “A sustained period of low interest rates has stimulated the UK Forestry investment market, driving cash holding investors to look for alternatives. Forest ownership is perceived as straightforward, long-term and low risk in uncertain times.

"Our research tells us that, cash on deposit would have accumulated 19% in value before tax since the financial crisis of 2008 – meanwhile trees growing on a hill in South Scotland would have accumulated 35% over the same time. Throw in the inflationary growth in capital market value and the performance is boosted to over 80%.

“New planting remains an area of focus," said Mr Adamson. "2017 saw some progress in England, and Scotland is now beginning to reap the benefit of strong Government support and a keen industry, however there is still much to be done in this sector and the availability of physically suitable land at an appropriate price remains the biggest challenge.”

Savills noted, however, that average forestry values are diverse and factors such as location, access, tree species, average age and timber volume/quality all have an influence on the price paid which varies across the regions. In all properties there are areas that are unplanted, such as lochs, rivers, rides and tracks – these unproductive areas have a relatively low and fairly constant value, therefore the amount of productive and unproductive areas in a forest will have a significant effect on the price paid.