The market

The market for forest property in Latvia primarily consists of many small plots of land between 5 and 40 hectares in size. The properties are usually distributed amongst many individual owners that have their origins in the re-distribution of property that was carried out after the fall of the Soviet Union. Many of the properties now for sale have their origins in this privatization process.

Generally speaking, the larger and more geographically concentrated property holdings are, the higher they are valued. The large forestry companies do normally not engage in the purchasing of smaller plots of land. They are primarily interested in purchasing larger holdings, but at a higher price.

Latvia’s total surface area is 64.6 thousand square kilometers. Approximately 52 percent of this is made up of forest which corresponds to approximately 3,04 million hectares. The largest individual owner is the Latvian State. (2018. Year information)

Price development

Property prices increased continuously until 2008 only to fall during the economic crisis of 2008-2009. The prices are dependent on the condition of the specific property as well as the timber volume, but in general the Latvian prices are 10-30 percent of the Swedish ones

The two main differences between the markets in Sweden and Latvia are that Sweden has a better infrastructure and that the forest has been more actively managed in Sweden. In many cases little or no management whatsoever has taken place.

The assessment, however, is that the differences in infrastructure and lack of management does not motivate the differences in property prices as they exist today.

Another important factor to consider is that in many properties also include agricultural land. This land is often of good quality and generates cash flow by means of EU-subsidies.  Price levels for agricultural land are also well below what is common in Sweden and it is expected that they have a similar potential for increases in value as forest land.

 

Larger property packages have a higher value

Individual properties usually have a lower price than larger property packages. Property packages are considered more attractive for larger buyers such as forest companies, larger investors and institutional capital such as pension funds etc. Latvian Forest Co has, as an integrated part of its strategy, the ambition to create packages that can be attractive for these types of investors.

The timber market

Operations are dependent on the development on the international timber market in such way that the turnover generated is directly related to the prices that can be received for sold timber. Income is usually generated in connection with harvesting, thinning or other activities.

The timber prices are also reflected in property prices. These are, however, affect more by future expectations rather than short term fluctuations in timber prices. The timber market is per definition international and the prices are only to a lesser extent affected by local factors.

In summary, the product, i.e. sawlogs, pulpwood and energy wood, can be sold for similar prices as in Sweden, but the input value, i.e. the price per cubic meter at the time of purchase of forest land, is much lower. Profitability per sold cubic meter is thus significantly higher.

For current share prices and other information related to the share please visit the Spotlight website.

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