Differences between initial and sale prices of Swedish forest properties : a statistical study and explanatory interviews

Sammanfattning: The Swedish market for forest properties is on fire. The prices of forestland is increasing all over the country and in year 2015 record prices occurred in some parts of Sweden. A probable explanation is that forestland generates a relatively good yield from a stable investment. In addition, the interest rate is low which is facilitates for potential investors. It is predicted that 1,5 million hectares of forestland, with a value of approximately 77 billion SEK will change owner in the next five years. The valuation of forest properties is a complex matter as they hold both monetary and non-monetary values. For example, the value depends on: standing volume, growth, geographic location, infrastructure, land consolidation, local capital density and recreational values. Previous studies have examined how both monetary and non-monetary values affect the prices of forest properties. However, there is a gap in the studies about factors affecting the price development from initial price to sale price. A possible explanation is the phenomenon underpricing which implies that brokers use an initial price below the estimated market value in order to attract many potential bidders. Hence, this phenomenon is investigated as one of the reasons for the potential differences between initial and sales prices. The aim of this paper is to examine and explain potential differences between the initial and sale prices of pure forest properties in Sweden. Pure forest properties have neither arable land nor buildings. The aim is fulfilled by finding whether differences occur and how potential dif-ferences may be explained. A mixed methods design is used containing a quantitative part in-cluding data from the SLU Market Price database during the years 2011 to 2016. The data is reduced to 214 observations that is compiled and analyzed by a regression analysis. The study also contains a qualitative part where brokers are interviewed in order to aid the explanation of the quantitative results and to include another perspective to the study. The findings display an average percentage difference between initial and sale prices in the Swedish market for pure forest properties of 8,1 percent. Neither the average percentage differences nor differences for the individual brokers indicates the use of underpricing. However, 21 percent of the properties sold in Sweden during the period have differences between initial and sale prices that may indicate underpricing. Further, 42 percent of the properties sold in Sweden have differences below 10 percent or no differences and 37 percent have differences between 10 and 25 percent. Capital density, county and the dummy variable “small property” are variables with a positive affect on the difference between initial price and sale price. Another variable affecting the difference positively is bidding neighbors. A variable that affects the difference between initial and sale price negatively is standing volume.