30 FOREST VALUATION 



a. Conditions affecting the Income: 



1. Conditions which are part of the property itself; area and 

 shape of the property, soil, topography, water supplies and drain- 

 age, improvements. 



2. Conditions which are not part of the property, or which 

 extend beyond the property : climate, market, facilities for trans- 

 portation, labor, taxation, character and business of the surround- 

 ing people, and demand for properties. 



b. Conditions not affecting the income but important from the 

 standpoint of sentiment : 



Beauty of the property and surroundings, social conditions, 

 church, school, etc., family ties, habits, love of sport, "land hunger," 

 etc. 



With farmlands it is often more the second group of conditions, 

 (b) which set the price, so that generally, the world over, farm lands 

 are rated and paid for at a price higher than is warranted by income. 

 But even in forestry it is frequently this second set of conditions 

 which are decisive so that the majority of large estates held as for- 

 est parks today in the United States are held more for love of 

 scenery or sport than as properties for income. 



The sale value fluctuates greatly with demand for land and is 

 easily affected by "booms." It is an old experience in the United 

 States to see a few land dealers, by means of shrewd advertising, 

 succeed in a few sales at high prices. Whether always bona fide or 

 not, such sales tend to raise the price of land for the entire district, 

 in spite of the fact that there is no justification for this advance in 

 larger crops or better prices. 



2. The income value of the land, or expectation value de- 

 pends on the crop, rent or income which the land produces and the 

 interest rate which is assumed or is set by the individual making the 

 valuation. As indicated before: 



net income 



income value, 



o.op 



where p is the interest rate assumed and where the income is a 

 yearly one as in farming. 



The income itself depends on the conditions enumerated under 

 sale value and the ability of the owner. 



The interest rate usnall varies with: 



a. Outside conditions : 



Money market, location of property (old country as against 

 newly settled districts), good and bad times, etc. 



