Diversification is the most crucial thing in a portfolio, and forestry investment in New Zealand could be your answer. Forestry investment has the potential to be a very sound investment in New Zealand, and the future looks bright. It is easy to find forestry businesses that can make a profit and provide forestry investment returns NZ on your money. However, it is also important to understand what makes a good investment.
The basics of investing in Forestry in New Zealand. Find out how to get into Forestry Investment
Find out how to start investing in forestry in New Zealand. Forestry Investment Process
Find out if investing in forestry through forestry syndicates is right for you. Forestry Syndicates
Find out if forestry is a great investment in New Zealand in 2022 : Why Invest In Forestry
Find out how much forestry investment returns are in New Zealand. Forestry Investment Returns
Check out some of the major benefits of forestry investment in New Zealand. Benefits of forestry Investment in NZ
Check out some of the major risk associated with forestry investment in New Zealand. Risk With Forestry Investment In NZ
Find out where to start investing in Forestry in New Zealand. Forestry Investment Companies In New Zealand
Forestry investment 101
Investing in forestry means purchasing trees of a commercial species and growing them to harvestable size. Forestry investment is a long-term investment, usually between 20 and 40 years.
Like any other investment, forests are purchased for their expected return or yield. The majority of forest ownership in New Zealand is made up of family-based forest owners with properties ranging from a few hectares to several thousand hectares.
The main attraction of forestry investment is that the value of the trees increases over time. Other investments like stocks or property tend to go up and down in value, but trees only go one way.
How does Forestry Investment work?
The most common form of forestry investment is the purchase of standing timber to be harvested and processed at a future date. It is also possible to invest in the planting, managing, and harvesting of forests. If you don’t have access to sufficient capital to buy your own forest, you can invest in units in a forestry investment fund or syndicate.
The forestry investment process has many different steps and requires adequate time and research. The steps involved include;
Deciding on a land area to buy
Securing funding for the investment by way of finance or joint venture partners
Finding the land with the help of a specialist such as Greenplan Investments NZ
Fulfilling all the legal requirements for buying that land
Buying the land for the purpose of forestry investment
Planting trees and harvesting them after the desired period (planted trees take about 10 years to mature)
Selling your timber to get your return on investment.
One way to get into forestry investment in New Zealand is to join a forestry syndicate. These can be either an ‘open’ or a ‘close’ syndicate.
An open syndicate allows investors to join or exit at any investment stage. Open syndicates are usually best suited for smaller investments and attract lower management fees.
Almost all forestry syndicates in New Zealand are closed syndicates. A closed syndicate is one where the investors are locked in for a defined period of time, usually 15 to 20 years. The majority of forestry investment schemes fall into this category, as it suits the long-term nature of the investment.
Why invest in Forestry and Land?
Forestry is the third-largest export industry in New Zealand, and forestry land is a desirable asset class.
New Zealand has an abundance of renewable timber, and currently, around 700,000 hectares are under permanent forest production. With its ideal growing climate, high-value trees grow rapidly in New Zealand.
The country has a long-term track record of sustainable forest management and the use of renewable resources.
In New Zealand, forestry investments are growing quickly because of favorable government policies, a strong outlook for timber prices, and expanding markets in Asia.
What you should consider : Forestry is a long-term investment. It can take 20-30 years before you start making money. Some investors have lost money by not having a plan or by not taking the time to do their research and compare options.
Your Forestry investment returns NZ will depend on the tree species you grow, how well you manage them, what happens to your log prices, and so on.
Before you invest, consider:
- the type of tree that will grow well on your land
- whether someone will want to buy the trees when they are harvested
- the cost of planting, pruning, and harvesting – which may be more than you expect
- the cost of managing pests and weeds – especially in the first 10 years when the trees are most vulnerable
- how you will get your trees harvested, pruned, and processed
Is forestry a good investment?
Forestry is a great investment with an incredible track record. The timber industry in New Zealand has been going for well over 100 years, and it has proved to be resilient over that time.
If you invest in forestry for the long term, you can make money from:
- harvesting trees and selling them as logs or wood products
- harvesting carbon credits
- leasing your land to others
- tax advantages
Forestry investment returns NZ
Forestry returns per hectare NZ are widely varied. The average return per hectare for forestry in New Zealand is $1,500 per hectare. This is a net return after all costs are taken into account, including harvesting, pruning, and replanting. The median return is $1,350, while the top 10% of forests earn an average of $2,600 per hectare.
Forestry investment returns NZ are showing positive signs, with an average increase of 9% over the past five years.
While investment in forestry is showing strong performance, it’s important to note that the best performing forests will benefit from good management, while low-performing forests may often be undermanaged.
What are the benefits of Forestry investment?
Investing in forestry offers a range of different benefits for investors. Firstly, it’s a relatively liquid asset, which means that it’s more easily converted into cash than assets like houses, for example.
Investing in forestry and land is not only a way to gain diversification from traditional investment classes but also provides a sustainable source of income through timber sales and land value appreciation.
Forestry can provide an inflation hedge through increasing timber prices, which are driven by strong demand, limited supply, and the cost of production for alternative products, such as concrete and steel.
The rural sector is vital to the New Zealand economy and has weathered recent global economic downturns better than many other industries.
What are the risks of forestry investment?
There are some financial risks associated with forestry investment in New Zealand.
One of the biggest risks is that the forest you have invested in will be struck by a natural disaster such as a fire or storm. Extreme weather events like Cyclone Bola and Cyclone It could cause significant damage to forests, but these events are infrequent in New Zealand, and measures can be taken to mitigate their impact.
The insurance cover you take out for your forest should minimize this risk, but it is worth noting that insurance does not cover all eventualities.
The planting and establishment of the forest is the most critical stage for future growth. If this is not done properly, it could result in poor growth rates, high mortality rates, or even no trees being established at all. Make sure your forest manager has strong experience with establishing forests in the location that you are investing in.
Another risk is that as the trees grow, they will be exposed to a range of risks that may affect their growth rate and, ultimately, their value when harvested. Risks will vary by location, soil type, and species planted.
Where to Invest?
Pukekowhai Forest :
The Pukekowhai Forest is a 10,000-hectare forest comprising one-third of the total estate. Situated in the Ruahine Ranges and approximately 20 kilometers southwest of Hastings, the Pukekowhai Forest has been managed as a commercial plantation by Greenplan since 2007. The forest has a mix of radiata pine and douglas fir with a freehold tenure.
Greenplan was established to meet New Zealand’s growing need for professional forestry management services. It manages an extensive range of commercial forests throughout New Zealand, covering over 130,000 hectares on behalf of its clients.
It aims to maximize returns to investors by providing sound management advice and efficient service. Its investment philosophy is based on long-term capital growth coupled with sustainable cashflows through careful asset selection, active management, and the use of specialist advisers.
Greenplan secondary market :
Greenplan operates a resilient secondary market, giving investors the opportunity to sell off their units if their circumstances change.
The secondary market also allows Greenplan investors to purchase partially-grown forest plots at an earlier stage in the company’s ecological system.
Do You need consent?
Before you invest in forestry in New Zealand, you need to know whether you need consent under the Overseas Investment Act 2005.
You must apply for consent if you are a foreign investor and you want to:
- Acquire an interest in sensitive New Zealand assets
- Carry out business activities on sensitive land
- Acquire control of a New Zealand company that holds sensitive New Zealand assets.
What is sensitive New Zealand land?
In most cases, ‘sensitive New Zealand land‘ means your investment will be in one of the following three areas:
- -Land over 5 hectares in size that is not part of a city or town (this does not include farms) — this is called ‘rural land.’
- -Land within a city or town over 0.4 hectares but does not exceed certain maximum sizes — this is called ‘urban land.’
- -Fishing quota.
Types of forestry consents :
There are 3 different consent options, depending on what you intend to do with the land:
Land use consent (LUC) – to clear native forests, change the land use, or carry out other activities that may affect the environment.
Coastal permit – if your land is within the coastal marine area (CMA). This is an area extending from a high water mark out to 12 nautical miles offshore.
Resource consent – if you need a land use consent and have one or more of the following activities on your property:
- sheep and beef farming (other than milking)
- dairy farming
- vegetable growing
- market gardening
If resource consent is required, you’ll need to apply through your regional council. The types of activity listed above are not permitted in some areas, so you should check with your regional council before planting forests on these lands.