Discount rates used for forest valuation - results of 2021 survey

Abstract

A total of 23 forest valuers responded to the survey and provided information on 25 New Zealand and four Australian transactions in 2020 and 2021. The average reported implied discount rate (IDR) for the New Zealand transactions is in the range 3.4% to 9.5% for current rotation pre-tax cashflows (17 transactions) and 4.7% to 8.4% for multiple rotation pre-tax cashflows (14 transactions). Overall, averages are 6.2% (current rotation) and 6.6% (multiple rotations) compared to 7.3% and 7.1% in the 2019 survey. IDRs for the transactions of medium or large forests are, on average, lower than those for small (<1,000 ha) forests, 5.3% vs 6.9% for current rotation pre-tax cashflows and 6.3% vs 7.3% for multiple rotation pre-tax cashflows.