Farm Ireland

Monday 22 January 2018

Mature woods sell for €3,500 an acre

Western farmers offloading forests to trade up and purchase better quality agricultural land

The evidence suggests that farmers are selling forests, once premiums have been claimed, to buy better quality land
The evidence suggests that farmers are selling forests, once premiums have been claimed, to buy better quality land
Jim O'Brien

Jim O'Brien

There is increasing evidence that farmers are selling land suitable for forestry and ground planted for the past 15 to 20 years to buy better-quality agricultural land.

According to Roscommon-based auctioneer John Earley, there is a live market for such property. "Vendors are selling both unplanted land and ground with 20-year-old timber, where all the premia have been claimed," Mr Earley said.

"They are getting €3,500-5,000/ac and are going on to buy better land at €8,000/ac and more."

He admitted that in some instances the crop on the planted land might be somewhat neglected and the parcels can be large, anything from 50-100ac, but the crops still have value.

According to Farming Independent forestry columnist Joe Barry, there is a buoyant market for timber as the use of wood for heating means that demand is outstripping supply.

"The contractors are flat out at the moment, every bit of available timber is being snapped up," claimed Mr Barry.

"For instance, if the Edenderry power plant in Co Offaly reaches its target of co-fuelling its peat burning with 30pc carbon-neutral fuels, it will have the capacity to burn the entire output from Irish woodlands."

Traditionally, the real money to be made in forestry is from the premia. Indeed, many investors who bought forestry land at less than IR£1,000/ac in the mid-1990s have received three times the purchase price in premia and still have the land. However, the general consensus in the industry is that the forestry premium regime is about to change. While the Department of Finance has accepted that the forestry industry is worth up to €8bn to the economy, it is nevertheless proposing to reduce the annual forestry budget from €104m to €84m. According to the department's latest figures, it is targetting planting levels of 2,000ha, whereas the previous stated target was 10,000ha.

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It is accepted that this will undoubtedly have an adverse impact on the economics of forestry production. Even so, a price of €3,500-5,000/ac for 20-year forestry is certain to attract strong interest, given the buoyancy of the wood market.

Dermot Houlihan of Timberland Forestry claimed that after 15 years or so, many people in Ireland and Britain have moved on from forestry. He said that the value of such forestry depended on what was planted and how well the plantation was maintained. "If you have the right trees, well looked after, then you will have good value. Obviously a crop of ash on good land should be worth more than citrus spruce on rushy ground. However, a poor crop of broadleaf is only firewood."

Mr Houlihan said that forestry had been a good investment returning a solid, if moderate, return. "You will get [a] 5-6pc return on forestry; that has been consistent for the past decade and a half. Many people dismissed this potential return as too little, especially at the height of the boom, but it is still returning 5-6pc.

"Some investors only wanted to know about it if it could double its value. Maybe these people went off and bought apartments or something, and more luck to them."

The forestry consultant pointed out that forests and forestry land has always been valued in accordance with what it could return.

Irish Independent