Forests in Latvia are relatively cheap, say experts

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Latvia has one of the lowest prices for forests in the region, according to experts, Latvian Radio's broadcast Eiro fokusā reported August 14.

53% of Latvia's territory, or 3.4 million hectares, is covered by forests. According to data from the Ministry of Agriculture, Latvia is the fourth greenest country in the European Union (EU) and wood processing is one of the cornerstones of the Latvian economy. Half of Latvia's forests belong to the state, while the rest is managed by 135,000 private forest owners. Although currently prices for coniferous wood have increased significantly, forest prices in Latvia are still well below those in Scandinavia.

Arnis Muižnieks, Chairman of the Board of the Latvian Forest Owners Society, said that the price per hectare of forest land in Latvia has increased significantly compared to the beginning of the 90s. The price increases are influenced by both the value of forest land and the volume of trees and wood growing on it.

He said: "I remember the 90s when the forest could be bought for 50 lats per hectare. Now even the price for a clearing is already reaching EUR 1,500 per hectare. The pricing of a property takes place by evaluating a number of factors. First of all, the availability of the location of forest property is being assessed, because unfortunately not everywhere there are roads. If the property is not readily accessible, the value will be lower than the value of the property on the side of the road or where the access rights are established. Soil fertility and humidity conditions should be taken into account. If the place is swamped, of course, the price will be lower. What's important is what is growing, what species of trees, how old the forest is, whether it will be possible to harvest wood in the near future, or have to wait several decades. Then, from the market situation, it is assessed how much this wood is worth."

The price of forest land in Latvia is the lowest in the Baltic, not to mention forest prices in Scandinavian countries.

Sandijs Lūkins, head of the forest sales division of the real estate company Latio, said that a survey is conducted every year in the Baltic Sea region: "In southern Sweden, a hectare of forest land costs up to €10,000, in Latvia equivalent land costs around €3,000. In Lithuania, there are more trees per hectare than in Latvia, the average stock is higher, with prices relatively high – around 4.5 thousand per hectare, on average. In Estonia, the price is above €4000 per hectare. The first and most important thing is that we have much stricter forest legislation compared to the Scandinavian countries. There is a specific period during which the forest may be developed, the age at which trees may be felled. In Scandinavia, however, the forest owner can choose the management cycle themselves."

Arnis Muižnieks mentioned another aspect: in Scandinavia, forests are often family property for several generations, so the sale of the forest is also an emotional decision.

“If I sell my family property, which has belonged to my father, grandfather and great-grandfather, then surely the value of that property in Scandinavia is higher. Secondly, the amount of money available to forest owners in Latvia and forest owners in Scandinavia varies. Compared to Estonia, the price difference is no longer as high, around €100 per hectare, and in Estonia the forest owner is much more likely to make a decision on how to manage the property. Lithuania sets limits on how much land can belong to one owner."

The head of the “Latio” forest sales department Sandijs Lūkins estimated that the price of forest land in Latvia will certainly increase, so forest is a beneficial source of investment.

“The investment opportunities are pretty good and the buyers who buy properties here don't waste it. Because in Latvia the possibility of increasing the value of forests is much higher than in the 'old' European countries,” Lūkins said.

According to the Ministry of Agriculture, the share of forestry, woodworking and furniture production in gross domestic product accounted for 5.1% in 2019, while exports reached EUR 2.6 billion, representing 20% of the country's total exports.

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