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Wall Street Journal: timberland value continues to grow
30/01/2009
The Wall Street Journal has identified forestry as an extremely wise long-term investment, and says that timberland value has continued to grow despite the economic slowdown.
The article states, "timberland is the ultimate long-term investment, with relatively little bought and sold each year - and demand still respectable for what does change hands."
Growth stood at 5% in the year up to the end of September 2008, and this rate is not expected to have dropped significantly when 2008’s final quarter values are announced by the National Council of Real Estate Investment Fiduciaries, later this week.
Values have been falling in many investment areas over recent months, with the value of oil falling 54% in 2008, copper falling 54% and corn falling 11%. Lumber prices have also fallen as the housing market shrinks.
So why is timberland value on the up? Its long-term investment potential is the key. Its price remains steady as relatively small amounts are bought and sold each year. Investors see it as a dependable option, “timber will never be an orphan….As long as the sun shines, the trees will grow," says long-time timberland investor, Jeremy Grantham from GMO. The most money is made from timberland when investors cash out when the land is sold after 10-15 years.
Timberland appreciation has averaged 4.1% each year for the past ten years, compared to 3.8% for the Standard & Poor’s 500 stock index. Its dependable reputation also comes from the fact that Timberland isn’t too closely linked with other asset classes. This makes their value less affected by variables like inflation, market trends and interest rates.
The article states, "timberland is the ultimate long-term investment, with relatively little bought and sold each year - and demand still respectable for what does change hands."
Growth stood at 5% in the year up to the end of September 2008, and this rate is not expected to have dropped significantly when 2008’s final quarter values are announced by the National Council of Real Estate Investment Fiduciaries, later this week.
Values have been falling in many investment areas over recent months, with the value of oil falling 54% in 2008, copper falling 54% and corn falling 11%. Lumber prices have also fallen as the housing market shrinks.
So why is timberland value on the up? Its long-term investment potential is the key. Its price remains steady as relatively small amounts are bought and sold each year. Investors see it as a dependable option, “timber will never be an orphan….As long as the sun shines, the trees will grow," says long-time timberland investor, Jeremy Grantham from GMO. The most money is made from timberland when investors cash out when the land is sold after 10-15 years.
Timberland appreciation has averaged 4.1% each year for the past ten years, compared to 3.8% for the Standard & Poor’s 500 stock index. Its dependable reputation also comes from the fact that Timberland isn’t too closely linked with other asset classes. This makes their value less affected by variables like inflation, market trends and interest rates.
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