The Forest Market – Income Methods for Determining the Value of Forest Resources

Abstract This article describes the methods for estimating the value of a forest, the accuracy of which is critical for purchases and sales, credit security, determining the shares in the division of forest real estate, as well as in determining the amount of compensation for losses in forest property. Compensation for property losses also includes past events that occurred before the Second World War, such as nationalization or loss of the forests in the eastern territories of the Second Polish Republic due to border changes. An equally important objective of forest valuation, which has recently gained in importance, is the inclusion of its value in a forest holding balance sheet. However, due to the lack of fully objective market prices for forest property, this work focused on the analysis of the quantitative and qualitative characteristics of the forest market and the methods of calculating the income (rent) value of the forest. Examples of commercial transactions from the forest market in the USA, Austria and Germany are included. The study presents a historical outline of forest valuation with particular emphasis on methods based on the income value, including forest rents. Furthermore, we discuss the formula of the perpetual capitalization of annuity and periodic annuity, including the impact of various net income calculations, that is, in arrears or in advance