Starting on January 1, 2020, foreign insurance companies stopped buying forests after a ban came into effect in Lithuania. This ban restricts forest buyers and their related persons from purchasing more than 1,500 hectares of forest land.
However, for a long time, the blind people saw the benefits of this restriction: the sharp fall in the price of non-mature forest land made it an attractive investment for others besides professional investors. The forest is an extremely stable real estate, but anyone who wants to buy a forest needs to know and understand at least the basic things, Most importantly, they must understand the forest is more than trees.
Differences Between Forests
The definition of forest is much broader than that which describes a forest as an area covered with trees. The forest is the trees that grow on it, accumulated wood, soil microorganisms, shrubs, grasses, mosses, and various animals.
For example, Lithuanian forests contain more than 20,000 species of animals, 6,000 species of fungi and 1,800 species of plants. For animals, the forest is a home; it provides a safe place to hide, food, and water. Also, forests protect lands from wind and water erosion, affect water levels in rivers and lakes, filter the air, and offer humans a feeling of satisfaction, tranquility, and inspiration.
A plot of 10 acres or more overgrown with trees can already be called a forest. If the trees are temporarily unavailable due to human activities or natural phenomena (fellings, fires or other causes), the plot is still considered a forest.
Anyone who’s been in a forest can confirm that the forest is not homogeneous; even the same type of forest varies in height, density, soil moisture, fertility, and other parameters. Foresters would call this a division into taxing plots, which is defined as the proportion of forest land that is distinguished from other land based on forest group, subgroup, habitat, species composition, etc.
Forest land which may vary in taxing plots but has the same humidity and fertility conditions is called a plantation. ‘Habitat’ means an area of forest land which has the same levels of soil moisture and fertility.
The term ‘density’ is not used in forestry, but ‘salinity’ is used instead. It shows the ratio of stand volume to normal stand volume. The salinity can range from 0.3 to 1.1 (the higher the better).
Another very important indicator is the forest group. There are four groups. The lower the group number, the more constrained the economic activity is.
- Group I forests – reserve forests. These cannot be used for economic activities and cannot be used without permission. All are state-owned. An excellent example is the Nagliai Reserve on the Curonian Spit.
- Group II forest – special-purpose forests. They are further subdivided into groups IIA and IIB. Group IIA, ecosystem protection forests, are usually also protected or anti-erosion forests. Group IIB, recreational forests, are recreational forests. They do not allow clear felling. They belong to both state and private owners, but we would advise investors to avoid these forests.
- Group III forests – protective forests. Although the name implies protection and strict restrictions, economic activities are not as strictly restricted as in Group I or Group II forests. Up to 5 hectares can be cleared, but only when the forest is outside the national park. These forests can belong to both state and private owners.
- Group IV forests– farm forests. We would suggest focusing on this group, as their main purpose is to continuously supply timber. Recently, people have distinguished two separate groups, IVA and IVB. IVA are normal felling forests and IVB are short felling plantation forests.
Regardless of the forest group, additional restrictions may apply to the forest, such as Natura 2000, EC habitat protection, Red Book sites, and biosphere polygons. It is best to contact a VMT (State Forest Service) specialist by cadastral area number or obtain a connection to the VMT self-service system.
Forest Areas in Lithuania are Increasing
For Lithuania, which does not have abundant natural resources, the forest is important in many aspects. Therefore, it’s important to efficiently farm wood from these forests and prevent it from rotting.
In Lithuania, forests which contain about 547 million hardwoods, cover more than 1/3 of the country. Dzukija is the most wooded place in Lithuania. It’s dominated by unproductive sand that makes it unattractive for farming, but suitable for the growth of pine forests. About 35% of the forests in Lithuania are pine forests.
Unfortunately, there are more and more public speculations and outrages about the massive deforestation of Lithuanian forests, as well as about forests sold to foreigners. However, from a statistical point of view, this outrage seems to have no real basis. Forestry data shows that forest areas, mature stands, and total stands in Lithuania are increasing. Both the forested part of the country and the volume of wood accumulated therein are constantly increasing. Thus, the belief that Lithuanian forests are threatened with extinction is only a myth.
There is another myth in society: the forest owner does what he wants in his forest. This is not true. Economic activity in the forest is governed by 2 basic legal acts – the Forest Law and the Logging Rules. Also, on January 1, 2020, The Law on Special Conditions of Land Use came into force, imposing restrictions on protection zones. If a forest area of 3 hectares or more is to be cut, a forest management project must be prepared. This project is required for business planning and is valid for a minimum of 10 years. More about this: Types and rules of deforestation →
Although forest owners face many challenges such as volatile legal regulation, forest theft, and meteorological phenomena (storms, fires), the investment risk is barely above the minimum. Buying a forest is worth the investment because the tax environment is quite comfortable. The forest is not subject to land tax and there is an annual increment of timber. And in the long run, the prices of forest and timber are rising at a rate close to inflation. This knowledge about forests is available, so learn what can be different about forests, how to correctly calculate the price of your forest, and how to earn from your investment.
