How money DOES grow on trees – as forests reap returns of 9%
MONEY really can grow on trees for investors in woodland with annual returns from commercial forestry averaging 9 per cent over the past 20 years. It is not just landed gentry who can enjoy the thrill of owning a forest. Investors can get involved for as little as £10,000 which could buy them a oneacre wooded spinney.
Joe Fielding is a forest manager and land agent for trading website Woods4Sale. He says: ‘Although woodland can be a great long-term investment many buyers do it for the pleasure it brings them and their family.’
Fielding says buying woodland can enable families to enjoy activities such as camping out under the stars, coppicing and green woodturning – carpentry when the timber is still fresh and pliable.
Bernard Russell, 69, who lives near Doncaster in South Yorkshire, purchased an eight-acre plot of woodland three miles from his home five years ago for £24,000.
The retired landscape architect says: ‘It is a fabulous retreat full of wildlife diversity. Everything from oaks, beech, ash, elm, cherry and sycamore trees through to sweet woodruff and crab apple.’
He adds: ‘ With careful management, I have thinned the woods and opened glades with spring flowers. It is an idyllic family retreat.’
Earlier this year Bernard opened up the woodland for his six-year-old grandson Finn and 80 guests so they could enjoy a picnic, build dens and have archery lessons. In August his son Ben, 36, will hold his wedding reception in the woods.
Rules for owning woodland mean permanent dwellings must not be built that can be slept in but tool sheds are allowed. You can camp in the woods up to a maximum 28 days a year. Owners can cut up to five cubic metres of timber every quarter – more than enough to keep a house heated using woodburners. If you want to cut more wood then you must apply for a felling licence from the Forestry Commission.
For details of local woodland for sale visit specialists such as Woods4Sale. co. uk, Woodlands. co. uk and Johnclegg.co.uk. The charity Small Woods also offers guidance on buying.
It is also possible to take advantage of tax breaks by investing in woodland though this is primarily targeted at owners of commercial forestry with the minimum investment usually set at £40,000.
If the forest is commercially managed it can be classified as a business property and qualify for full inheritance tax relief after two years. But even if the land is not commercially managed it still escapes inheritance tax on the timber value after five years. Any increases in value from commercially growing timber is free of capital gains tax – though the land does not escape it. A mature commercial wood might expect threequarters of its value to be in the trees and a quarter held in the plot of land. All income generated from commercially managed woodland – such as the selling of timber – is free from income and corporation tax.
Anthony Crosbie Dawson, manager at forestry investment specialist FIM Services, says: ‘Our entry level for investing is £40,000. It may seem like a lot of money but it gives you access to commercial forestry you might otherwise need more than a million pounds to buy directly. This is not about buying into a lifestyle but trying to make money and taking advantage of tax breaks.’
FIM Services looks after £290 million across three forestry funds. There is a steep initial charge of 2 per cent and a 0.75 per cent annual management fee. Annual returns after costs have averaged 11 per cent over the past five years.
OTHER specialists in commercial forestry include Tilhill Forestry. It sells complete forests of at least 125 acres of tree-planted land with prices starting from £250,000. Jason Sinden, a director at Tilhill Forestry, says: ‘The value of timber keeps rising, partly due to increased demand from the building industry. This is on top of any increase in the value of land. A key appeal of forests is that a tree is a physical asset that you can actually kick or hug. We charge 2 per cent as an acquisition fee for sourcing forests and perhaps £1,000 a year in management fees for looking after commercial woodland – plus another £200 a year for insurance.’
Those seeking further inspiration on why they should get involved in woodland might consider the book A Tale Of Trees: The Battle To Save Britain’s Ancient Woodland, by Derek Niemann.