The situation in the forest property market appears to remain relatively stable. No major upheavals have been experienced in the volume of forest property transactions or market price levels during the early part of the year, and the most significant drivers of change appear to be related to factors outside the forest property market. General economic uncertainty is naturally reflected in the trade of forest properties. In light of current statistics, the war in Ukraine does not appear to have a significant impact on the market, although the review period is relatively short, as the average sales time for a forest property is around two months. In any case, as a tangible asset class, forest properties retain their value well despite fluctuations in the stock market, and short-term outlooks for industrial wood demand and expected stumpage price levels also bring positive expectations to forest investment as a counterweight to increasing uncertainty.
Market activity
Activity in the forest property market has remained stable for quite some time; the number of publicly listed transactions for properties exceeding 10 hectares of forest land has stayed around two thousand transactions for years. During the most recent 12-month period from 1 April 2021 to 31 March 2022, a total of 1,964 forest property transactions were completed. Traditionally, the beginning of the year (January–March) has been the quietest time in the market, which was also the case this year. There were 372 forest properties publicly listed for sale in the early part of the year, which is 5% more than during the corresponding period the previous year. On the other hand, the number of forest properties sold, 408 units, was slightly lower in the early part of the year compared with 2021.
However, these small changes in the numbers of listed and sold properties fall within the scope of natural market variation, and there are no signs of significant fluctuations in market volume. Nevertheless, from the slightly increased number of properties coming onto the market, it can be inferred that the market is becoming more active, and the spring and early summer season has typically been one of the most active periods of the year in the forest property market.
Price level development
The price level of forest properties has been on a significant, and in recent years even accelerating, upward trend. Based on the Suomen Sijoitusmetsät Market Price Index, the annual change in price level at the end of March was +10.9%, and the change for the early part of the year was +2.3%. Although the change in price level is this rapid, the pace of change has already calmed down slightly from last year’s record figures, and the change in the early part of the year already portends an annual change of less than 10% for this year. The rapid rise in inflation during the early part of the year in particular is already having a significant effect on the real change in price levels: over the one-year review period, the real change is “only” +5.0%, which is still substantial. However, considering the early part of the year alone, the real price development of the forest property market is already slightly negative.
The market price level is expected to continue its rise further into 2022, and no major capital flight from institutional forest property portfolios is in sight.
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