January 28, 2015
Driven by a resurgence in the housebuilding sector, U.S. timberland posted returns of 6% for the fourth quarter of 2014 – the best returns since the same quarter in 2007 according to the National Council of Real Estate Fiduciaries (Ncreif). Timberland managers are capitalizing on increased domestic demand for wood as data indicates that builders began construction on 1.01 million homes in 2014 – the most since 2007 and double the record low of 554,000 units in 2009 at the height of the global financial crisis. Farmland returns for the fourth quarter outpaced timber, but only marginally at 6.6%, marking the sector’s worst performance since 2010. Usually, the fourth quarter is the strongest on high incomes and total return due to sales of crops after harvest and the financial activity that comes with it. Permanent cropland returned a total of 14.4% for the fourth quarter of 2014 – 4.2% from land appreciation, and 10.2% from income, whereas annual cropland returned only 0.6% – due to a 1% increase in income which was offset by a 0.4% decline in values. In contrast to timber and permanent crops, Corn Belt land values fell by 1.9%.
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