Market Price Forecast
MHE determines value from realised transactions
The Market Price Forecast (MHE, from the Finnish Markkinahintaennuste) is a peer-reviewed statistical model that predicts a forest property’s probable transaction price from realised transaction data, much like housing market price models. The model draws on more than 15,000 analysed forest property transactions that we have collected and enriched over twelve years.
When value is derived from what has actually been paid for comparable properties, the estimate does not rest on calculation assumptions. The model does not decide alone, however. An expert checks the input data, assesses the property in the field and sets the result against the regional market. For the investor, this means every offer comes with a justification derived from the market and checked by an expert.
Peer-reviewed statistical model
15,000+ transactions in the dataset
Updates with the market
Every property also assessed in the field
Methods
Why the asking price does not tell you market value
Three methods are commonly used to price forest properties, and they produce different values for the same property.
Summation approach
The values of the property’s components (land, young stands and standing timber) are added together, and a discretionary adjustment is then applied to the total. The method is the most common basis for asking prices, but the size of the adjustment is left to the appraiser’s judgement and the outcome deviates systematically from realised prices.
Income approach
Value is calculated as the present value of future cash flows. The method is useful for testing required returns, but the outcome depends heavily on the chosen discount rate and growth assumptions: a small change in parameters changes the value significantly.
Market Price Forecast
Value is predicted from realised transaction data with a statistical model. The method tells you what is likely to be paid for the property, not what should theoretically be paid. We use MHE to price every property and income calculations alongside it to verify required returns.
Due diligence
DD covers the data, the terrain and the title
Statistical valuation is only reliable if its inputs hold. That is why every property goes through the same review before an offer.
Forest inventory data verification
The quality of open forest inventory data varies by property. Stand data is verified and corrected, because even a small error in timber volume or structure transfers directly into the property’s value.
Site productivity assessment
Site types and their actual productive capacity are assessed, because they determine how the property’s value develops for decades ahead. Growth forecast parameters are verified property by property.
Field assessment
Every property is assessed on site before it is presented. The field confirms what data cannot show: harvestability, road condition, damage and the silvicultural state of the stands.
Title and encumbrance review
Easements, road rights, zoning status and other rights and restrictions attached to the property are reviewed before an offer, so no surprises transfer with ownership.
Use cases
Valuations for existing assets as well
Valuation is not only needed when buying. We also carry out valuation engagements for existing forest assets and entire forest property portfolios: to track portfolio value development, for financial statements and reporting, and as a basis for divestment decisions. The engagement produces a signed valuation report that can be used as such for financial reporting and investment monitoring.
An independent second opinion
If your forest assets have already been valued, but the valuer is selling, buying or managing the property, you need a view with no stake in the transaction. We benchmark the valuation against realised transaction data and our Market Price Forecast, and give a reasoned view of where it stands against the market. A valuation is a separate engagement and does not commit you to any of our other services.
Cash flow analysis
The valuation is complemented by a cash flow analysis, which projects the assets’ return development over different time horizons and interest rate scenarios, based on harvesting income, management costs and investments. The investor gets a clear view of the forest assets’ cash flow and return profile and their effect on the stability and return of the overall portfolio.
FAQ
Questions about valuation
Contact us
Need a valuation for a single property or an entire portfolio? Tell us your starting point and we will explain how the Market Price Forecast and a field assessment meet your needs. We always start with analysis, not sales.
