Land will always be in high demand, therefore investing in it is likely a good bet. But when it comes to what type of land to buy, timberland is among the top choices. This finite resource is becoming an attractive purchase for land buyers, leaving many to wonder, what is timberland's future?
Timberland is an ideal investment because it offers attractive returns with minimal risk. The need for paper products or wood for building won't diminish in the years the come, so timberland owners can rest assured they have a sound investment that will likely stay in demand for years to come.
"Timberland as an investment is really a great way to diversify your portfolio and at the same time you can enjoy the recreational side of owning timberland such as hunting, fishing, or just riding and looking at your property," said Jim Logan a land broker for Mossy Oak Properties Logan Land Company. "You can't do that with a stock or bond."
According to Wood Markets, a research group, lumber production is expected to increase 5.4 percent in 2014 compared to 2013. The report noted that much of this gain will be reliant on single-family home construction, as this accounts for a significant portion of lumber sales.
As the recession forced many to put off building a new home, demand remains high for housing, which bodes well for timberland owners. Combine this with the ever-increasing global population and it appears demand for timberland has nowhere to go but up. The United Nations' Food and Agricultural Organization's 2005 Global Forest Resources Assessment predicted that consumption of wood and wood-related products will rise 60 percent by 2030.
Timberland isn't volatile
Perhaps one of the most attractive aspects of timberland investing is the fact that even when other markets are underperforming, it tends to remain consistent, growing each quarter. Some areas, like Alabama and South Carolina are seeing even more significant gains.
"Today's timber markets are strong in our area and we expect that trend to continue," Logan said, talking about Alabama. "A well managed timber tract can yield good returns on your investment and can give you unlimited memories with your family as you enjoy all the opportunities timberland ownership gives you."
For example, when the S&P plummeted 38 percent in 2008, timberland prices increased 9.5 percent, according to the National Council of Real Estate Investment Fiduciaries index for timberland. Another prime instance of timberland outperforming other financial investments was during the Great Depression, when stocks fell 70 percent and timber gained 233 percent. Even when the housing market crashed in 2008, timberland continued to show double-digit returns. Where investors might be looking to diversify their portfolio, timberland could be the perfect answer.
Timberland continues to be a top investment choice for many, and those considering a purchase will want to get in early. The latest data from the NCREIF revealed that timberland prices rose 1.6 percent in the first quarter of 2014 compared to the fourth quarter of 2013, when they jumped 5.9 percent.
Experienced brokers are available to help those buying land make a more informed purchase.