0835 Leisure Summer 08_aw.indd - HLL Humberts Leisure

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Fractional OwnershipBom Sucesso, Silver Coast. Near LisbonFraction of the costLes Milton asks if the future for holidayhome sales lies in Fractional OwnershipIt is fair to say that the market for holiday homes in the UK andEurope is under some pressure as in the US, although with anexchange rate of $2.00 to the pound Floridian property is definitelyworth inspection.But even against this depressing background, Brits who havealways had a well cultivated ownership gene, could find the currentmarket full of opportunities – if they are prepared to consider therelatively new concept of fractional ownership, sometimes calledshared ownership.Fractional Ownership – what is it ?Fractional Ownership allows several unconnected buyers tocollectively own the freehold of a holiday home. In practice thedeveloper finds the buyers and guides them through the ownershipprocess. Quite often fractional ownership involves four people eachcontributing towards the cost of buying the property between themi.e. they each own 25% of the bricks and mortar.So if you have a second home budget of £ 100,000 rather than buya one bedroom apartment in Southern Spain, you could afford aquarter share of a £ 400,000 villa. The legal implications may sounddifficult and risky – but they are not. Fractional packages of thisnature have been available in Europe, especially in Portugal for thelast seven years with few problems or complaints.Think about it. How much practical sense is there in owning asecond home in a sunshine resort when at best you can only spend6 or 7 weeks there each year. With, say, a quarter share, you wouldhave 13 weeks a year potential occupancy of a villa that you own.You could stay there for some of the time,give your parents or family the opportunityfor a holiday break and still have time to rentout your villa to recover some of your costs.Remember if you own 25% of the homeequity, you only pay 25% of the service andmaintenance costs.Fractional Ownership meets the needs ofmany potential buyers.■ Those who would like to buy their dreamhome but lack the funds.■ Others who may have the funds butrecognise that it makes no economicsense to own a property outright forlimited use.■ Research suggests that the majority ofpeople can only holiday for 8-10 weeksper year, maximum.■ Fractional Ownership is also the perfectway to test ownership before committingto the outright purchase of a villa orapartment.Over the last six years Fractional Ownershiphas been the fastest growing sector of theUS property market and in 2006 it grew by+32% over the previous year.In Europe the concept was introduced a fewyears ago but is quickly growing, especiallyin the South.32 Summer 2008
Fractional OwnershipBecause owning a second home has been seen as a sunshinepurchase, the UK has been slow to start but now many developersare looking for sales options other than outright sales. For themFractional Ownership could be an option.For any market place to work effectively it demands an equilibrium.The consumers must find the concept attractive and affordable. Andfor those providing the purchasing opportunity, it must be financiallyrewarding, practicable and relatively easy to provide and administer.Fractional Ownership allows propertydevelopers to offer an attractive alternative tooutright purchase. Buyers can still OWN anequity stake in a property which will increasein value as the market improves.If the developer has more opportunities to sell, his overall velocityof sale – a key market benchmark – increases accordingly. Mostimportantly, fractional ownership creates a year-round resortpopulation. The resort has a busy, successful atmosphere which isenjoyable and reassuring. Resorts need a buzz.And finally, for the developers a busy community providesopportunities for secondary income – rentals and resortmanagement, greater profits in restaurants and bars, and busy golfcourses, shops and spas.Fractional Ownership is the future for many buyers anddevelopers alike.Enter Fractional OwnershipAbout 10 years ago the property marketers in the US married twoimportant factors. Firstly, many people want a holiday home, ideallythat they could own themselves. Secondly, Timeshare was not alwaysattractive, but the concept of occupation rights on an annual basiswas – it provided the security of knowing that the holiday venue wasdetermined in advance, the facilities and amenities were known, likedand held no surprises. And the holiday planning process was easy,hassle free and the accommodation was already prepaid.The Fractional Ownership Consultancy based in Guernsey andSpain was the first company to provide the legal and administrativeframework that developers of resorts worldwide could adopt toensure a totally hassle-free arrangement and a win-win situation forboth developer and owner. Today FOC structures the contractualarrangement between all parties making it flexible yet watertight.FOC has even teamed up with a leading UK building society tooffer – for the first time ever – mortgages on fractions of properties.The most popular Fractional Ownership arrangementsinvolve four partners. Although properties with morefractions are possible care needs to be taken to avoidlocal or EU laws and directives being brought in toplay, which could adversely affect the operation ofthe fractional system. With proper structuring up totwelve fractions ought to be possible inmost jurisdictions.Most Fractional Ownership packages are available in quality resortswith a full range of amenities and facilities. The resorts, and thereforethe individual properties, are professionally managed and theirconsiderable infrastructure is kept in superb order for the benefit ofowners and visitors alike. Resorts being run using the FOC fractionalinfrastructure include the Mona Lisa Resort at Disney’s world famousCelebration Resort in Florida, where quarter shares in two-bedroom,two bathroom luxury apartments with all the 5-star amenities can bebought for £ 80,750 through Dream Quarters (www.dreamquarters.co.uk). In Portugal, Vigia’s Parque da Floresta villas (www.vigiagroup.com) are similarly priced and Oceanico Developments (www.oceanicodevelopments.com) have a range of fractional options and prices.Recently they have introduced a fractional package which includes ashare of a luxury villa with extensive golfing rights, an on-hand speedboat and free car hire when you are there.Some say there are also extremely strong environmental reasonsfor buying a property on a fractional basis. Some believe that it isbecoming increasingly irresponsible for people to own holiday homesthat are only infrequently used. Making a conscious decision to shareyour holiday home means fewer homes need to be built and lessenergy required in their construction and maintenance.And finally from a financial perspective Fractional Ownership isgood news. Owners and investors have found that appreciationin fractional property values reflect the outright sales market. Asdoes the rental market. Fractional owners can offer rentals – oftenthrough the developers’ rental services which can make a significantcontribution to their annual service and maintenance costs.Fractional Ownership – it’s too good an opportunity to miss.ContactLes Milton is Chairman of the Fractional Ownership Consultancywww.fractional.netNigel Talbot-Ponsonby FRICS, Londone: ntp@humberts-leisure.com t: +44 (0)20 7629 6700Please note: The contents of this article are the author’s sole responsibility.They do not necessarily represent the views of Humberts Leisure Limited.www.humberts-leisure.comHLL Humberts Leisure 33
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