Strong investment returns have driven a boom in forestry investments in recent years

Mr Grainger says the new rush of investors are primarily from Asia, Europe and North America and they have been attracted by not only the strong investment returns, but favorable policies on encouraging sustainability that has reinvigorated the interest in the sector.

Forestry in New Zealand has been dominated by long standing industry players, some 30 parties controlling 70% of the productive forestry.

“What’s changed is the entrance of a new wave of investors at a similar scale. We’re seeing more big timber funds and private family companies looking at the market, many of which have not been active before.”

Mr Grainger says that the new players are not only attracted by strong returns but the relative safety and low management costs the asset class offers.

“Log prices have been undergoing steady growth in the past decade. Export prices have grown from $121 to $165 per cubic metre a decade ago, to $176 to $222 as of March this year.”

Mr Grainger also states that with the government supporting continued investment into forestry, there is good reason to remain optimistic about forestry’s fundamentals.

With the New Overseas Investment Office legislation going through, Parliament will allow overseas investors to invest with growing confidence

“What we are seeing globally is a push towards more environmentally sustainable products being used, and wood is certainly at the forefront of that. So, I think overall, it’s looking very positive for the wood product sector.”

The sector also generated more than $3.5b for New Zealand’s GDP – two fifths of which came directly from forestry and logging. New Zealand has 1.7m hectares of plantation forest, compared with 10.8m hectares of pasture and arable land.

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