2/3/2009
WHY FRACTIONAL OWNERSHIP IS PROVING PROFITABLE
THERE’S always a catch with holding onto cash.
For those lucky enough to be holding on to savings in 2009, the dilemma is a unique one: where to put money when the banks look exposed and there is little or no value in interest rates.
The stock market is a minefield of risk and a second home can be a burdensome, costly hassle. But there is an investment growing in popularity that may represent a genuine alternative.
Fractional ownership is an arrangement entered into by individuals who want to share both the risks and benefits of property ownership, most typically by purchasing a holiday home.
Not to be confused with timeshare, when none of the property is actually owned by the partners, buyers actually purchase a share in the bricks, mortar and land.
And it is a global phenomenon.
Northcourse Ltd, one of the largest fractional consultancies, revealed that in 2007 the industry achieved record sales volumes of US$1.98bn, a rise of 20 percent on 2006, in the United States, Canada and the Caribbean. The market is gaining popularity too in Europe, and is estimated to be worth $1.2bn in the Middle East.
Supporters claims its success is due to two key factors. The perception among investors that there is still value in real estate, and the added benefits of not going it alone.
Buyers joining up with 10 other people own 1/10 of the property, 1/10 of the maintenance and taxes and 1/10 of the amount of holiday time and 1/10 of the investment potential on their cash.
Most importantly they only get 1/10 of any problems because everyone shares the duties of caring and securing the place or employing a managing agent.
Although the arrangement is common among family members, its popularity among friends and even strangers is growing fastest.
The practice of shared ownership of a holiday home has been around for many years, but as an industry, it really began during the 1990s in America’s Rocky Mountain ski resorts.
Developers looking for quick sales recognized that clients did not want to buy a whole home that they would only use a few weeks a year.
Syndicates and collectives started up, and they operated as private member groups with small numbers on a non-profit basis, generally just sharing expenses and usage.
These groups evolved from modest apartments to multi-million pound properties and developers caught on fast.
Builders are increasingly adding fractional real estate to large scale master planned resorts to diversify their offering and sell off expensive assets that might otherwise prove difficult to shift in the downturn.
The developer Taylor Woodrow de Espana has converted 16 of its unsold residential units on its Las Encinas de los Arqueros and Los Robles de los, in Andalucia, into fractional units.
Many more properties are becoming available in some of the most stunning locations in the world.
How about buying into a 14th century medieval Hamlet, in Borgo di Vagli, Tuscany? For €63,000, a one bedroom residence is all yours.
Trewhiddle, in south Cornwall, could signal a new era for holiday homes in the UK, with buyers able to own a fully managed holiday villa next to the beach.
Each holiday villa is owned by a co-ownership company, in which the villa purchasers legally own a share. Prices start from £54,950 for an eighth share.
And if you are looking further overseas, the stunning Residences Island Gardens, Miami, is a private residence club and yachting resort offering luxury ownership of fully furnished residences situated in 10 acres in Biscayne Bay.
Buyers should always get contracts checked out by a lawyer to ensure that there is clean and legal title.
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