A different type of investment… Land………. With trees on it
Over the past 20 or so years there was quite a large area planted to plantation timber in Australia.
With the failure of many MIS schemes most of the large land holdings were sold as in individual parcels( typically at below cost). Recently there the have been a number of smaller parcels of forestry and agro-forestry land for sale.
All of the cheaper parcels (sub $500k) seem to be planted on more marginal areas (sub 600mm rainfall), however seem to be selling for what I would consider quite a low price, even less than the land is worth bare for farming . I have seen places advertised where cropping country is $2.5k plus ha, however land planted to pines is $2k a ha). The reasons I believe this is
- There is an uncertain future as to the value of the pine
- Capital tied up for long time before return
- There is high cost to regenerate the land to pasture/ cropping (at a guess $2.5k ha, basically what, if not more than what the land is worth)
- Often they were not planted on prime agricultural land.
- Cost to process will be high as they are outside of key growing regions.
However looking at the returns, it appears that the returns can be about $7,000 a ha, although the reference I have is from 1999, prior of the collapse of MIS’s. http://www.agric.wa.gov.au/PC_92525.html
Calculations based on the first property below (really rough guesses, round figures, does not taken into account inflation and there are a lot of unknowns):
Purchase price $300k ($265,000 + costs)
Interest @ 7% = $21kpa
Holding (rates, maintain fences etc) $3k pa
Harvest after trees are 30 years old (currently 15 years old)
So 15 x $24k pa = $360k costs, plus purchase of $300k, less residue value ?? $200k (as pointed out above the can be stuffed after having pines on)
Yield 90ha @ $7k ha = $630k
Profit (300+360-200-630) = $170k over 15year = 4%pa
Here are some links to examples of places for sale which I found of interest (all are in the SA/ViC border region)
http://www.realestate.com.au/property-horticulture-vic-edenhope-7248512
http://www.realestate.com.au/property-mixed+farming-sa-western+flat-7361521
http://www.realestate.com.au/property-other-sa-bangham-7214563
http://www.realestate.com.au/property-other-sa-western+flat-7318170
Link to a PIRSA (Primary Industry and Recourses SA) of discussion on pine plantations, relevant to the geographical areas where the above properties for sale are.
http://www.pir.sa.gov.au/__data/ass...S09_Growing_Trees_in_the_Upper_South_East.pdf
http://outernode.pir.sa.gov.au/fore...eStudies/upper_south_east_radiata_pine_survey
Anyway I thought I would see what others thoughts are on this type of investment. More just to chew the fat and generate some discussion.
Me personally, there is to much unknown to make the numbers stack up. However in terms of a lifestyle/ weekender type place (I have never been much of a beach man haha), at least there is some potential for a return (possibility significant)
Cheers
Pat
Over the past 20 or so years there was quite a large area planted to plantation timber in Australia.
With the failure of many MIS schemes most of the large land holdings were sold as in individual parcels( typically at below cost). Recently there the have been a number of smaller parcels of forestry and agro-forestry land for sale.
All of the cheaper parcels (sub $500k) seem to be planted on more marginal areas (sub 600mm rainfall), however seem to be selling for what I would consider quite a low price, even less than the land is worth bare for farming . I have seen places advertised where cropping country is $2.5k plus ha, however land planted to pines is $2k a ha). The reasons I believe this is
- There is an uncertain future as to the value of the pine
- Capital tied up for long time before return
- There is high cost to regenerate the land to pasture/ cropping (at a guess $2.5k ha, basically what, if not more than what the land is worth)
- Often they were not planted on prime agricultural land.
- Cost to process will be high as they are outside of key growing regions.
However looking at the returns, it appears that the returns can be about $7,000 a ha, although the reference I have is from 1999, prior of the collapse of MIS’s. http://www.agric.wa.gov.au/PC_92525.html
Calculations based on the first property below (really rough guesses, round figures, does not taken into account inflation and there are a lot of unknowns):
Purchase price $300k ($265,000 + costs)
Interest @ 7% = $21kpa
Holding (rates, maintain fences etc) $3k pa
Harvest after trees are 30 years old (currently 15 years old)
So 15 x $24k pa = $360k costs, plus purchase of $300k, less residue value ?? $200k (as pointed out above the can be stuffed after having pines on)
Yield 90ha @ $7k ha = $630k
Profit (300+360-200-630) = $170k over 15year = 4%pa
Here are some links to examples of places for sale which I found of interest (all are in the SA/ViC border region)
http://www.realestate.com.au/property-horticulture-vic-edenhope-7248512
http://www.realestate.com.au/property-mixed+farming-sa-western+flat-7361521
http://www.realestate.com.au/property-other-sa-bangham-7214563
http://www.realestate.com.au/property-other-sa-western+flat-7318170
Link to a PIRSA (Primary Industry and Recourses SA) of discussion on pine plantations, relevant to the geographical areas where the above properties for sale are.
http://www.pir.sa.gov.au/__data/ass...S09_Growing_Trees_in_the_Upper_South_East.pdf
http://outernode.pir.sa.gov.au/fore...eStudies/upper_south_east_radiata_pine_survey
Anyway I thought I would see what others thoughts are on this type of investment. More just to chew the fat and generate some discussion.
Me personally, there is to much unknown to make the numbers stack up. However in terms of a lifestyle/ weekender type place (I have never been much of a beach man haha), at least there is some potential for a return (possibility significant)
Cheers
Pat