Discount rates used for forest valuation - results of 2013 survey

Abstract

Sixteen forest valuers responded to the survey and provided information on 28 New Zealand and four Australian transactions between mid-2011 and 2013. The average reported implied discount rate (IDR) for the New Zealand transactions was in the range 5.5 to 10.8 per cent for post-tax cashflows and 5.1 to 11.5 per cent for pre-tax cashflows. There was greater variation in IDR in this survey compared to 2011. Overall averages were 7.3 per cent (post-tax cashflows) and 8.9 per cent (pre-tax cashflows), compared to 6.7 and 9.3 per cent in the 2011 survey. Differences between 2011 and 2013 averages are not statistically significant. Forest valuers also provided the discount rate they used to estimate the market value of a forest. Valuers applied a discount rate in the range 5.5 to 9.5 per cent (average 7.0 per cent) to post-tax cashflows or 8.0 to 11 per cent (average 8.7 per cent) to pre-tax cashflows. Nine of the 16 valuers included in the 2013 survey also participated in the 2011 survey. They used discount rates for forest valuation that are on average 0.2 per cent lower than in 2011.