The rising price of land being sold for forestry use is putting a floor under the agricultural land market. Speaking with auctioneers this week, many reported how the price of bare land sold for use as forestry has risen steadily in the last few years from less than €3,500/ac to about €4,500/ac at present.

In certain cases, as much as €5,000/ac is being paid for land and this is putting a floor under the market for the price of agricultural land.

One auctioneer in the west reported how the market for agricultural land in his area was actually weakening and coming back towards this floor, meaning more land is being sold to forestry buyers.

“Very often bidding at auctions will open with an offer from a forestry buyer, and in a lot of cases they will be the last man standing. At many auctions I wouldn’t have a single bidder on land if it wasn’t for forestry interest,” said one auctioneer contacted by the Irish Farmers Journal.

The reason for the upswing in the price of forestry land is diverse. Firstly, the forestry sector was one of the big winners in last year’s budget, with income derived from timber felling restored to tax-free status.

This, coupled with the grants available to establish the initial forest and annual forestry premiums that average €200/ha, mean that significant private investment is now being drawn into forestry.

Interestingly, a considerable amount of this private money is coming from pension and investment funds, many of which are based in Europe.

“There is definitely a lot of new money in the sector,” said one auctioneer.

With the tax burden gone on forestry income, it has become very attractive for these funds to build up large land banks of forestry around the country. One auctioneer in the mid-west told the Irish Farmers Journal they had been asked to help fill a 1,000ac portfolio for a pension fund.

Speaking with the different timber companies who plant and often buy the land on behalf of these funds, there is consensus that private funding flowing into forestry is only going to increase in the years ahead.