Determinants of the market price of forest estates: a statistical analysis

Previous methods for estimating the market value of forestlands have often been based on net present production value. However, at least in Sweden, such methods are not sufficient to provide reasonable estimates of market prices of such properties nowadays. The objective of this study is to increase knowledge regarding effects of various factors or characteristics on the value of forestland, including its size, shape, fragmentation, site productivity, and capital density index. The theoretical and analytic framework of the research is Rosen's hedonic pricing model. Based on results obtained from regression analysis, implicit prices for each characteristic have been generated. Two statistical models are presented: one for properties located in southern Sweden and another for properties in northern Sweden. Land value per hectare is described as a function of capital density index, size, and fragmentation. The results show that land value per hectare is positively related to the capital density index, but negatively related to the fragmentation and size of a property. Other characteristics, such as shape and site productivity, do not seem to affect the value of forestlands. This implies that certain characteristics of a property may have little significance for pricing, although an apparent lack of influence may be a consequence of the methods used to define and analyze the forestland characteristics.