There have been no dramatic changes in the transaction volumes or prices of small and medium-sized forest properties in recent years. This is revealed in the latest forest property market review by Suomen Sijoitusmetsät Oy.
The review examined nationwide forest property transactions over the past 3.5 years.
The largest change in the industry since 1 January 2016 has been the shift in market focus from Northern Finland further south, following the depletion of UPM Bonvesta’s property supply.
Prices per hectare and per cubic metre have risen steadily during the review period. The only clear jump in the statistics is found in the size category of the largest transactions, i.e., those exceeding €500,000. However, the largest category in terms of transaction volume represents only 68 transactions out of a total of over 4,200 forest property sales; thus, behind the skyrocketing curves lie a few individual transactions of forest properties that are more heavily forested and more valuable in terms of their price per cubic metre than average.
The true market price level of forest properties is best described by the Market Price Index, which takes into account regional changes in supply as well as changes in property characteristics. It has risen by 7.2 per cent over the two-year review period.
Between the major regions, the change in the Market Price Index is distributed such that the index is slightly rising in Central and Southern Finland, while it remains nearly flat in Northern Finland. In Lapland, the low volume of transactions creates significant fluctuation in the index between quarters, though it ended with an upward trend in the second quarter of 2019.
The value of large forest properties has improved
The forest property market is experiencing a rising trend, where transaction prices have been two per cent higher than Market Price Forecast values for the past couple of years.
– Previously, it was thought that there was a bulk discount on the prices of large forest properties compared with smaller forest properties with similar characteristics. As recently as 2016, the prices of forest properties costing over €400,000 were, on average, below the value of their standing timber, notes Mika Venho, an expert at Suomen Sijoitusmetsät.
Now, large forest properties are relatively more valuable than small properties by all measures, which has also been influenced by regional changes in the supply of forest properties. The drying up of the supply of large forest properties in Northern Finland and the more active trading of large and particularly valuable forest properties in Southern Finland have shifted the key figures concerning large properties nationwide.
The market development of small and medium-sized forest properties, which are more abundant in terms of transaction volumes, has been more stable.
Professional buyers bring stability to the market
The increased role of funds and investment companies in the market has faced criticism. However, Mika Venho sees many positive aspects for the market in this development.
– Investment companies have the capacity to look after their assets with a long-term and systematic approach. Private forest owners may be forced to repay part of a loan quickly, which can lead, for example, to the harvesting of immature forests. Professional buyers increase market stability, Venho says.
Suomen Sijoitusmetsät Oy publishes a forest property market review four times a year.
Further information:
Suomen Sijoitusmetsät Oy
Mika Venho
Chairman of the Board
M.Sc. (Agr. & For.), Forest Engineer, Licensed Real Estate Agent (LKV)
045 154 6385
mika.venho@sijoitusmetsat.fi
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