Timber Investment Return Calculator

A typical managed softwood plantation adds roughly 3-6% of wood volume per year through biological growth — trees literally grow regardless of economic conditions. Timber prices historically drift with inflation plus a small real premium, so another 1-3% typically comes from price. Combined, historical timber returns have sat in the 5-9% range for long-hold investors.

How to use it

Enter the expected biological growth rate (how fast the standing timber volume increases) and the expected timber price growth rate. Both are expressed as annual percentages.

What the result means

The primary figure is the combined annual return: biological growth plus price growth, approximately additive for small rates (and properly compounded by the formula for larger ones).

Why timber is unusual

Unlike most assets, timber keeps delivering one return component — biological growth — regardless of economic conditions. In recessions when timber prices fall, investors can defer harvest; the trees keep growing and value accumulates. That flexibility is why institutional investors like the asset class.

What's not modelled

Land value, harvest cycle timing, management costs, insurance, and catastrophe risk (fire, pests). Real timber funds apply all of these. The number here is a biological-plus-price return, not a fund-net return.

Run it with sensible defaults

Using biological growth rate of 4%, timber price growth of 2%, the calculation works out to 6.08%. The defaults are meant as a starting point, not a recommendation.

The levers in this calculation

The inputs — Biological Growth Rate and Timber Price Growth — do not pull with equal force. The rate and the time horizon usually dominate — compounding means a small change in either reshapes the final figure more than a similar shift in contribution size. Test this by doubling one input at a time.

How the math works

Combined return compounds the two components: (1 + biological) × (1 + price) − 1. For small rates this is approximately the sum; at larger rates the multiplicative formula is more accurate. Excludes land value changes, which depend on local market conditions and are better modelled separately. Also excludes management costs and tax.

Using this well

What this doesn't capture

Steady-rate math ignores real-world volatility. Actual returns are lumpy; sequence-of-returns risk matters most in drawdown; fees and taxes drag on compound growth; and behaviour changes in drawdowns can reduce outcomes below the projection. The number represents one scenario rather than a forecast.