Sweden's `Green Gold' Poised for Record as Forest Prices Climb
(Bloomberg) -- Negative interest rates are making some Swedish forest owners very happy.
Prices for Swedish forests are heading for a record year as all-time low interest rates are driving investors to look returns for alternative assets and as owners use low borrowing costs to expand their holdings.
Prices rose to 419 kronor per cubic meter in the first half of 2017, from 398 kronor last year, according to data from the Federation of Swedish Farmers’ advisory business LRF Konsult. Prices are now on par with the record of 420 kronor set in 2010 and are likely to continue rising, the federation said.
“Everybody wants more forestland -- both private owners and companies,” LRF Konsult’s head of real estate Markus Helin said in a telephone interview. “The interest in buying forest is increasing from all directions, and I think that trend will continue.”
Forest prices are booming along with the Swedish economy, which is being fueled by record low interest rates and unprecedented stimulus from the central bank. The Swedish Riksbank has cut rates deep below zero and also pumped almost 300 billion kronor ($38 billion) into the economy through bond purchases.
The development is driven by southern Sweden, where prices per cubic meter are already at a new high and more than twice as high as in northern Sweden.
One of the main reasons for the soaring prices is the ultra-low interest rates, which according to Helin creates incentives for making investments in assets such as forests. What’s more, forest owners “generally have low debt ratios” and are taking advantage of low borrowing costs to buy more, he said.
In its Forest Barometer 2016 report, LRF Konsult estimated that forest for 86 billion kronor would change owners in the coming five years. The largest owners in Sweden are Sveaskog AB, which sells sawlogs, pulpwood and biofuel, and Svenska Cellulosa AB, which produces paper, pulp and wood. In addition, there are some 330,000 individual forest owners.
Sweden’s forests -- often referred to as its “green gold” -- have yet to attract any larger investor crowds from abroad, Helin said.
“We do see an interest from investors outside of Sweden, but it’s mostly Swedish investors, and especially investors who want to increase their forest areal,” he said.