Making most of the timber boom
Opt for an existing plantation to accelorate your returns
Published 12/10/2010 | 05:00
Is the smart money going into forestry at the moment? Industry insiders seem to think so. International timber prices have risen by 40pc in the past two years. However, forestry experts are confident that this is not just an isolated peak in the market.
"We've been tracking prices since 1976," said John Phelan of Woodland Forestry Services in Galway. "We'd see this price rise as simply a correction back to historical norms for timber."
What is giving Mr Phelan added confidence is the performance of the sector at a time when the construction sector is practically extinct.
"Timber prices are high at the moment because of the increasing environmental constraints on clear-felling beginning to kick in around the world," he said. "More controlled felling is underpinning demand and all the indications are the international markets will continue to remain strong into the future."
Looking at the domestic market, the evolving biomass sector has provided a new outlet for many forestry by-products, especially thinnings. It's one of the few sectors in the economy where exports are growing. "So if it's good now, that bodes well for a time when the construction sector finally gets going again," added Mr Phelan.
He has dealt with more serious enquiries in the past few weeks than he has witnessed for years. "Investors are re-awakening to the appeal of non-volatile, steady-as-she-goes investments like forestry," he added.
The icing on every forestry cake is the fact that forestry income is deemed tax exempt -- although this is subject to a high-earner income relief restriction. For most farmers, this will be worth an extra 20-40pc. Any tax-free income is also likely to be worth quite a bit more by the time this Government has implemented enough taxation measures to cover its tracks.
So it's not surprising that farmers are also queuing up to jump on the forestry bandwagon.