Discount rates used for forest valuation - Results of 2007 survey

Authors: Bruce Manley
Publication: New Zealand Journal of Forestry, Volume N.Z.J.For. 2007, Issue N.Z.J.For. 52(3) 2007, pp 21-27, Nov 2007
Publisher: New Zealand Institute of Forestry

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Abstract: A total of 19 forest valuers responded to the survey and provided information on 13 transactions between 2005 and 2007, as well as additional information on two transactions reported in the 2005 survey. The average reported IDR (implied discount rate) for each of these transactions was in the range 5.1 to 8.8% for post-tax cashflows and 7.1 to 11.9% for pre-tax cashflows. Overall averages were 6.7% (pre-tax cashflows) and 9.0% (pre-tax cashflows), compared to 8.4% and 10.2% in the 2005 survey. The reduction in IDR is most evident for sales of large forests - although data are limited.

Forest valuers also provided the discount rate they use to estimate the market value of a forest. They are using discount rates for forest valuation that are on average 0.8% lower than in 2005.

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