Forestry investment returns have stabilised despite a 9.5% drop in timber prices in 2001.

Investment Property Databank’s (IPD) UK Forest Index annual results show that although returns in 2001 remained negative at –1.9%, they were an improvement over the two previous years.

Reasons given for the further decline in timber prices include increased European production of panel products; a “significant” increase in the amount of recycled wood being used in board manufacture; the loss of several English sawmills; and the continuing strength of sterling.

Prices for coniferous standing sales have fallen by more than 60% since 1994, with mature and semi-mature plantations hit the hardest.

Long term annualised returns since 1992 represent a positive 1.1% a year but short term prospects “are not encouraging”, says IPD.