Forest Investment Is A Real Growth Market

Investors stuck in the property rut see investing in forests as a growth market. As property prices go through the boom-and-bust cycle that Tony Blair and Gordon Brown promised to eradicate from the British economy, investors are looking at alternative places to put their cash. Sustainable forestry management is one of the options many are considering.

For a relatively small investment of £10,000  – often less than a bank or building society is seeking for a cash deposit on a home – ethical investors can buy 300 hardwood trees in to replant an Asian rainforest. The investment also covers the costs of employing local villagers in countries like Sri Lanka and Malaysia to care for the trees and to harvest them in future years.

Many investment firms have forestry schemes for investors to buy in to – including Property Frontiers, an Oxford, England, based property investment consulting company. Their schemes are typical of the investments on offer – allowing a minimum £10,000 ‘seed capital’ that can grow in to about £250,000 over 15 years. These projections are based on a lumber price of £0.72 per board foot for the first thinning, increasing at an annual rate of 6% for the subsequent thinning and final harvest. The 5% profit share is retained as a harvest fee.

The timber company has allowed a generous 10% for harvest and processing costs, which covers the milling the trees. Everyone benefits from the investment – the investor from the return on capital and the workers and their families farming the forests who receive better pay that stimulates better living conditions than they would otherwise achieve. These investments also give UK taxpayers other benefits, like rollover relief on capital gains tax when disposing of the investment and SIPP tax breaks if the investment is managed within a pension scheme.

For more information contact Property Frontiers on +44 (0) 1865 202700.