Going up: Hedge fun – Going down: Hedge fund

Now that’s what I call a Hedge

Woodland is booming and the value of commercial holdings surged by up to 40 per cent in the past year.

The value of some woodland areas has doubled in four years and average prices last year were $8,500 (�4,250) a hectare, 80 per cent up on sales agreed during 2006, according to the latest forestry market audit by UPM Tilhill and Savills, the property consultancy.

And planting trees reduces one’s carbon footprint, by increasing carbon absorption. Purchasing existing timber and then not harvesting the wood can also help offset an individual or group’s carbon generation.

No doubt we will soon see City-bonus timber harvesters boasting of how many trees they are planting without mentioning that they are merely replacing the trees they have cut. Buying woodland is becoming an increasingly astute move for people wishing to find a haven for their cash.

After the credit crunch in the banking world, increasing numbers are anxious to acquire their own stretch of ancient woodland or commercial forest. Demand is outstripping supply at all levels: investors range from hedge-fund millionaires to small-time entrepreneurs with �100,000 to �250,000 to spend. The buoyancy of the market has also been attributed to the growing trend for green living.

The forestry report says that demand is intense throughout the UK, with the highest prices for woods within easy access to London and the South East. Average sale prices here vary between �8,000 and �12,000 a hectare. Woodland in more remote areas fetch �2,000 to �5,000 a hectare.

Buying a wood is an investment

Owning trees is fashionable. It does wonders in reducing the carbon footprint because growing trees absorb carbon dioxide. Woodland and trees are also fun and provide an amenity for family outings, barbecues, bird-watching, shooting, paintballing and mushroom picking.

Planning permission is almost never granted for a new home or lodge, but sheds and treehouses are allowed. Swings, rope walks and mountain bike trails are also popular.

The purchase of woodland can be a smart financial move. The asset is stable and income can be made from timber for fuel or construction. There are also tax advantages. Woodland is treated as business property and is subject to 100 per cent inheritance tax relief. No income tax is paid on any sale of timber and there is no capital gains tax on any gain in the value of the timber. Any increase in the value of land, however, is subject to capital gains tax.

Crispin Golding, a woodland investment adviser at UPM Tilhill, is upbeat about the state of the sector. He said higher prices were being driven by the growth in demand from the burgeoning economies in India and China.

The UK produces 8.5 million tonnes of timber a year, valued at up to �340 million. This represents just 15 to 20 per cent of the country�s needs. Timber production in the UK is expected to rise by 50 per cent in the next 15 to 20 years, spurred on by the Government�s targets for renewable energy.

Log, stock and barrel

But buying woods in the UK can be very unpleasant. Organizations like woodland.co.uk have sliced and diced traditional woodlands into nasty little development plots. And almost all the woods they sell have something wrong with them, such as being too close to a road.

Purchasers of these woodlands are even asked to enter into a covenant to ensure the quiet and peaceful enjoyment of adjoining woodlands and meadows – i.e. that you will never be able to enjoy them as you wish, and especially not live in them.

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