The use of income valuation methods to value rural property

Despite the advances that have been made in relation to the valuation of commercial, industrial and retail property, there has not been the same progress in relation to the valuation of rural property. Although the majority of rural property valuations also require the valuer to carry out a full analysis of the economic performance of the farming operations, this information is rarely used to assess the value of the property, nor is it even used for a secondary valuation method. Over the past 20 years the nature of rural valuation practice has required rural valuers to undertake studies in both agriculture (farm management) and valuation, especially if carrying out valuation work for financial institutions. The additional farm financial information obtained by rural valuers exceeds that level of information required to value commercial, retail and industrial by the capitalisation of net rent/profit valuation method and is very similar to the level of information required for the valuation of commercial and retail property by the Discounted Cash Flow valuation method. On this basis the valuers specialising in rural valuation practice should have the necessary skills and information to value rural properties by an income valuation method. Although the direct comparison method of valuation has been sufficient in the past to value rural properties the future use of the method as the main valuation method is limited and valuers need to adopt an income valuation method as at least a secondary valuation method to overcome the problems associated with the use of direct comparison as the only rural property valuation method. This paper will review the results of an extensive survey carried out by rural property valuers in New South Wales (NSW), Australia, in relation to the impact of farm management on rural property values and rural property income potential.

The Influence of Farm Management on NSW Rural Property Income and Total Average Annual Returns

The importance of agriculture in many countries has tended to reduce as their economies move from a resource base to a manufacturing industry base. Although the level of agricultural production in first world countries has increased over the past two decades, this increase has generally been at a less significant rate compared to other sectors of the economies. Despite this increase in secondary and high technology industries, developed countries have continued to encourage and support their agricultural industries. This support has been through both tariffs and price support. Following pressure from developing economies, particularly through the World Trade Organisation (WTO), GATT Uruguay round and the Cairns Group developed countries are now in various stages of winding back or de-coupling agricultural support within their economies. A major concern of farmers in protected agricultural markets is the impact of a free market trade in agricultural commodities on farm incomes, profitability and land values. This paper will analyse both the capital and income performance of the NSW rural land market over the period 1990-1999. This analysis will be based on several rural land use classifications and will compare the total return from rural properties based on the farm income generated by both the average farmer and those farmers considered to be in the top 20% of the various land use areas. The analysis will provide a comprehensive overview of rural production in a free trade economy.

The role of rural land in mixed asset investment portfolios

Rural land has not always been considered as a major long-term investment with both institutional investors and absentee owners in countries such as U.K. and Australia. Although rural land is included in both single asset and mixed asset portfolios in the U.S, it is not at the same levels as either commercial or industrial property. Rural land occupies over 50% of the total area of Australia, and comprises over 115,000 economic farm properties (excludes rural residential, hobby farms and rural lifestyle blocks. However, less than 1.6% of the total economic farm numbers are actually owned by corporate or institutional investors. This low level of corporate involvement in the Australian rural property market has limited both the investment performance research and inclusion of this rural land type in both property and mixed asset investment portfolios. In the U.S. rural land is also the most extensive real estate type based on total area occupied. The United States Department of Agriculture statistics (1998) show that in 1997 there were 2.06 million farms in the U.S., covering 968 million acres, with a total value of $912 billion and generating an annual income of $202 billion. The level of corporate ownership of farms in the U.S. is also higher than the level of corporate farm ownership in Australia. This high level of institutional ownership in rural land in U.S has provided the opportunity for the rural property asset class to be analysed in relation to it’s investment performance and possible role in a mixed asset or mixed property investment portfolio.

Total rural land performance in a free trade economy

The importance of agriculture in many countries has tended to reduce as their economies move from a resource base to a manufacturing industry base. Although the level of agricultural production in first world countries has increased over the past two decades, this increase has generally been at a less significant rate compared to other sectors of the economies. Despite this increase in secondary and high technology industries, developed countries have continued to encourage and support their agricultural industries. This support has been through both tariffs and price support. Following pressure from developing economies, particularly through the World Trade Organisation (WTO), GATT Uruguay round and the Cairns Group Developed countries are now in various stages of winding back or de-coupling agricultural support within their economies. A major concern of farmers in protected agricultural markets is the impact of a free market trade in agricultural commodities on farm incomes and land values. This paper will analyse the capital and income performance of the NSW rural land market over the period 1990-1999. This analysis will be based on land use and will compare the total return from rural properties based on world agricultural commodity prices.

An analysis and comparison of rural land sales

Rural land prices, in developed, free trade real estate markets, are influenced not only by prevailing economic conditions but also physical factors such as climate, topography and soil type. In broad acre farming and grazing operations, both commodity price and yields determine farm income. Yields, in turn, are a function of climate, topography and soil type. The strength of a rural land market is influenced by the overall rural economy in a Country, State or region. These differences in rural land markets can also vary within smaller regions. It has been held that rural land, in relative safe production areas, is less effected by adverse economic and climatic factors than land in more marginal agricultural areas. This paper will analyse rural land sales in both traditional cropping areas and marginal cropping areas for the period 1975 to 1996. The analysis will determine the overall trend in rural land prices over the period, compare the average annual return between marginal and established farming areas and determine which economic and production factors have influenced this change. The impact of this analysis will also be discussed in relation to rural land appraisal.

Reliability driven reconfiguration of rural power distribution systems

This paper presents a reliability-based reconfiguration methodology for power distribution systems. Probabilistic reliability models of the system components are considered and Monte Carlo method is used while evaluating the reliability of the distribution system. The reconfiguration is aimed at maximizing the reliability of the power supplied to the customers. A binary particle swarm optimization (BPSO) algorithm is used as a tool to determine the optimal configuration of the sectionalizing and tie switches in the system. The proposed methodology is applied on a modified IEEE 13-bus distribution system.

Droop control of converter interfaced micro sources in rural distributed generation

This paper proposes new droop control methods for load sharing in a rural area with distributed generation. Highly resistive lines, typical of rural low voltage networks, always create a big challenge for conventional droop control. To overcome the conflict between higher feedback gain for better power sharing and system stability in angle droop, two control methods have been proposed. The first method considers no communication among the distributed generators (DGs) and regulates the converter output voltage and angle ensuring proper sharing of load in a system having strong coupling between real and reactive power due to high line resistance. The second method, based on a smattering of communication, modifies the reference output volt-age angle of the DGs depending on the active and reactive power flow in the lines connected to point of common coupling (PCC). It is shown that with the second proposed control method, an economical and minimum communication system can achieve significant improvement in load sharing. The difference in error margin between proposed control schemes and a more costly high bandwidth communication system is small and the later may not be justified considering the increase in cost. The proposed control shows stable operation of the system for a range of operating conditions while ensuring satisfactory load sharing.

Modelling the broadband wireless channel in rural Australia

The internet infrastructure which supports high data rates has a major impact on the Australian economy and the world. However, in rural Australia, the provision of broadband services to an internet dispersed population over a large geographical area with low population densities remains both an economic and technical challenge [1]. Furthermore, the implementation of currently available technologies such as fibre-to-the-premise (FTTP), 3G, 4G and WiMAX seems to be impractical, considering the low population density that is distributed in a large area. Therefore, new paradigms and innovative telecommunication technologies need to be explored to overcome the challenges of providing faster and more reliable broadband internet services to internet dispersed rural areas. The research project implements an innovative Multi-User- Single-Antenna for MIMO (MUSA-MIMO) technology using the spectrum currently allocated to analogue TV. MUSAMIMO technology can be considered as a special case of MIMO technology, which is beneficial when provisioning reliable and high-speed communication channels. Particularly, the abstract describes the development of a novel MUSA-MIMO channel model that takes into account temporal variations in the rural wireless environment. This can be considered as a novel approach tailor-made to rural Australia for provisioning efficient wireless broadband communications.

Channel tracking algorithms for highly efficient wireless broadband communications in rural areas

High-speed broadband internet access is widely recognised as a catalyst to social and economic development, having a significant impact on global economy. Rural Australia’s inherent dispersed population over a large geographical area make the delivery of efficient, well-maintained and cost-effective internet a challenging task. The novel and highly-efficient Multi-User-Single-Antenna for MIMO (MUSA-MIMO) broadband wireless communication technology can effectively be used to deliver wireless broadband access to rural areas. This research aims to develop for the first time, an efficient and accurate algorithm for the tracking and prediction of Channel State Information (CSI) at the transmitter, by characterising time variation effects of the wireless communication channel on the performance of a highly-efficient MUSA-MIMO technology particularly suited for rural communities, improving their quality of life and economic prosperity.

Efficient wireless broadband communications to rural area

This paper discusses how internet services can be brought one step closer to the rural dispersed communities by improving wireless broadband communications in those areas. To accomplish this objective we describe the use of an innovative Multi-User-Single-Antenna for MIMO (MUSA-MIMO) technology using the spectrum currently allocated to analogue TV. MUSA-MIMO technology can be considered as a special case of MIMO technology, which is beneficial when provisioning reliable and high-speed communication channels. This paper describes channel modelling techniques to characterise the MUSA-MIMO system allowing an effective deployment of this technology. Particularly, it describes the development of a novel MUSA MIMO channel model that takes into account temporal variations in the rural wireless environment. This can be considered as a novel approach tailor-maid to rural Australia for provisioning efficient wireless broadband communications.

NSW rural land performance : 1990-2008

The annual income return for rural property is based on two major factors being commodity prices and production yields. Commodity prices paid to rural producers can vary depending on the agricultural policies of their respective countries. Free trade countries, such as Australia and New Zealand are subject to the volatility of the world commodity markets to a greater extent than those farmers in protected or subsidised markets. In countries where rural production is protected or subsidised the annual income received by rural producers has been relatively stable. However, the high cost of agricultural protection is now being questioned, particularly in relation to the increasing economic costs of government services such as health, education and housing. When combined with the agricultural production limitations of climate, topography, chemical residues and disease issues, the impact of commodity prices on rural property income is crucial in the ability of rural producers to enter into or expand their holdings in agricultural land. These problems are then reflected in the volatility of the rural land capital returns and the investment performance of this property class. This paper will address the total and capital return performance of a major agricultural area and compare these returns on the basis of both location of land and land use. The comparison will be used to determine if location or actual land use has a greater influence on rural property capital returns. This performance analysis is based on over 35,000 rural sales transactions. These transactions cover all market based rural property transactions in New South Wales, Australia for the period January 1990 to December 2008. Correlation analysis and investment performance analysis has also been carried out to determine the possible relationships between location and land use and subsequent changes in rural land capital values.

Urban rural water exchange : PRW in the Lockyer Valley

A significant amount (ca. 15-25 GL/a) of PRW (Purified Recycled Water) from urban areas is foreseen as augmentation of the depleted groundwater resources of the Lockyer Valley (approx. 80 km west of Brisbane). Theresearch project uses field investigations, lab trials and modelling techniques to address the key challenges: (i) how to determine benefits of individual users from the augmentation of a natural common pool resource; (ii) how to minimise impacts of applying different quality water on the Lockyer soils, to creeks and on aquifier materials; (iii) how to minimuse mobilisation of salts in the unsaturated and saturated zones as a result of increased deep drainage; (iv) determination of potential for direct aquifer recharge using injection wells?

Validation of FHWA crash models for rural intersections - Lessons learned

A national-level safety analysis tool is needed to complement existing analytical tools for assessment of the safety impacts of roadway design alternatives. FHWA has sponsored the development of the Interactive Highway Safety Design Model (IHSDM), which is roadway design and redesign software that estimates the safety effects of alternative designs. Considering the importance of IHSDM in shaping the future of safety-related transportation investment decisions, FHWA justifiably sponsored research with the sole intent of independently validating some of the statistical models and algorithms in IHSDM. Statistical model validation aims to accomplish many important tasks, including (a) assessment of the logical defensibility of proposed models, (b) assessment of the transferability of models over future time periods and across different geographic locations, and (c) identification of areas in which future model improvements should be made. These three activities are reported for five proposed types of rural intersection crash prediction models. The internal validation of the model revealed that the crash models potentially suffer from omitted variables that affect safety, site selection and countermeasure selection bias, poorly measured and surrogate variables, and misspecification of model functional forms. The external validation indicated the inability of models to perform on par with model estimation performance. Recommendations for improving the state of the practice from this research include the systematic conduct of carefully designed before-and-after studies, improvements in data standardization and collection practices, and the development of analytical methods to combine the results of before-and-after studies with cross-sectional studies in a meaningful and useful way.

Empirical investigation of interactive highway safety design model accident prediction algorithm : Rural intersections

One major gap in transportation system safety management is the ability to assess the safety ramifications of design changes for both new road projects and modifications to existing roads. To fulfill this need, FHWA and its many partners are developing a safety forecasting tool, the Interactive Highway Safety Design Model (IHSDM). The tool will be used by roadway design engineers, safety analysts, and planners throughout the United States. As such, the statistical models embedded in IHSDM will need to be able to forecast safety impacts under a wide range of roadway configurations and environmental conditions for a wide range of driver populations and will need to be able to capture elements of driving risk across states. One of the IHSDM algorithms developed by FHWA and its contractors is for forecasting accidents on rural road segments and rural intersections. The methodological approach is to use predictive models for specific base conditions, with traffic volume information as the sole explanatory variable for crashes, and then to apply regional or state calibration factors and accident modification factors (AMFs) to estimate the impact on accidents of geometric characteristics that differ from the base model conditions. In the majority of past approaches, AMFs are derived from parameter estimates associated with the explanatory variables. A recent study for FHWA used a multistate database to examine in detail the use of the algorithm with the base model-AMF approach and explored alternative base model forms as well as the use of full models that included nontraffic-related variables and other approaches to estimate AMFs. That research effort is reported. The results support the IHSDM methodology.

Optimization of long rural feeders using a genetic algorithm

This paper describes the optimization of conductor size and the voltage regulator location & magnitude of long rural distribution lines. The optimization minimizes the lifetime cost of the lines, including capital costs and losses while observing voltage drop and operational constraints using a Genetic Algorithm (GA). The GA optimization is applied to a real Single Wire Earth Return (SWER) network in regional Queensland and results are presented.