Despite general uncertainty in the property world surrounding the potential effects of Brexit, the UK forestry market continues to demonstrate a degree of resilience and posted another year of strong performance. Underpinning the forestry market, domestic timber, supported by a weaker sterling and the increasing demand for wood in biomass and construction, continues to drive value in the forest property sector.

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.

During the 2017 forest year the total value of the forestry investment market increased by 24% to over £112 million compared with around £90 million in 2016. Although this is significantly lower than the £146 million in 2015, the value of forestry transacted during 2017 is still 25% higher than the medium term average (Figure 1).

^{Source: Savills Research}

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 (Figure 2), but to a figure close to the medium term average. Contraction of the market area coupled with an increase in the overall value traded resulted in rising average values.

^{Source: Savills Research}

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. Our recent research reveals average productive values across the UK rose by 20% to £9,300 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 £7,300 per hectare. On average productive values were 27% higher than the average gross value and the average unproductive area was 32% per property.

^{Source: Savills Research}

Figure 3 above illustrates strong value performance across all of the four regions analysed during 2017, with average values in the north of Scotland showing the lowest change to average prices, reflecting the lesser competition for property in this area. In 2011, the difference between the maximum range in values was around £4,000, which compares to £13,000 in 2017 indicating increased divergence in regional values over recent years.

Regional performance

■ England and Wales

The highest average productive capital values were achieved in England and Wales with the average price rising by 50% to £16,300 per productive hectare (Figure 3). Although this level of increase seems very high we would caution that this is over a very small sample size and the high value appreciation is largely due to demand dependant factors: firstly, there is an increasing recognition of the value of productive woodland in England and timber returns are improving, increasing interest in the sector; secondly, there is a real scarcity of productive woodland for sale as demonstrated by the market share (Figure 4), where England and Wales posted the smallest market share since 2012.

^{Source: Savills Research}

■ South Scotland

Our research reveals average productive values rose by 21% to £12,800 per hectare in South Scotland. In addition, Figure 4 shows that the proportion of hectares sold also increased during the 2017 forest year.

South Scotland tends to achieve higher average capital values compared to the rest of Scotland due to the favourable physical conditions for growing timber and the highly competitive nature of the timber industry in this region. Sales generally completed quickly for strong prices.

■ Central Scotland

Central Scotland returned a 34% rise in average productive forest values during 2017 and had the largest market share (56%) (Figure 4). The high rate of growth in average value was largely as a result of lower average prices in 2016 and if you compare with 2015, the rise is 10% which is more representative of the market.

■ North Scotland

Although the number of hectares sold in North Scotland fell during the 2017 forest year, the average value increased by 35% to £3,500 per productive hectare. Due to the terrain and the reduced opportunities for marketing timber, North Scotland traditionally has lower values and with the exception of the increase in 2014, prices have remained fairly static over the past six years.

^{Source: Savills Research}