Fractional Ownership News

A long term vacation ownership lifestyle choice

Date: 28/09/2009
Article source: Fractionalownership.co.za

Over the past year or so it has become virtually impossible to ignore the promise of a lifestyle only the uber wealthy could afford…well it’s true, this lifestyle is actually obtainable at a portion of the cost the high flyers sitting in first class were paying not too many moons ago!  It seems fractional ownership has well and truly landed on our shores, and it is here for all to enjoy. However the question still remains, why does this make so much sense, what are people looking for and more importantly what are people buying into, can someone please explain if this is just clever marketers selling timeshare?

Well let’s start from the top, why does this make so much sense? If you own a holiday home outright you probably only get to utilize the property for 4 or 5 full weeks during the course of the year, you then probably find yourself spending the first few days of your hard earned ‘relaxing time’ cutting the lawn, cleaning the cupboards & linen and generally getting the house ready for all to enjoy.

With a fractional ownership you purchase a share in a managed company that owns a luxury property, the benefit of owning your share in this company & property usually entitles you to exclusive usage in the actual property for 4 weeks per year, so in essence you are still investing in property, and you are only purchasing the weeks you actually need, all this at a portion of the cost you would have spent if you purchased the very same property outright.

There are also additional benefits by renting out the weeks you don’t use, why not use this rental income to offset your portion of the yearly levy contribution ? The various costs of managing, maintaining & servicing the property are equally divided amongst the various shareholders in the property, in comparison this drastically reduces the monthly cash outlay you would spent if you were to pick up the entire tab for maintaining the property through whole ownership.

To put it all in perspective, these days you will be lucky to find a luxury 2 bedroom apartment on the beach for under 1.5 million, then once you have kitted out the property you may well be in for close to 1.6 million, this excludes the monthly expenses such as the resort levy, DSTV, security & insurances, this could quickly equate to over R 700 per month (excluding the golf membership & cleaning).

On a good fractional scheme you could buy a share in the very same property for under R 300,000 and enjoy the benefit of 4 weeks exclusive access during the course of the year, and better still your levy should come in under R 600 per month, who knows you might even get a daily cleaning service, Plasma screen, PVR decoder, 2 mountain bikes, a golf cart plus access to the resort course, all for included in the average R 600 monthly due.

Now we understand how this whole thing works, what are people looking for in a fractional investment and where are they buying into these properties? If you take into consideration that most fractional ownership schemes entitle you 1 week exclusive access to the property 4 times a year, then you would probably want to get there in a reasonable time, especially if you have the fill car with impatient kids! Thus the majority of investors are looking for a fractional property within 5 hours travel time, most of the guys in Gauteng do this daily to work & back, who wouldn’t want to get away for a hassle free week every few months if you had to do that every day?

According to Dirk Wilson of fractionalownership.co.za “The majority of fractional enquiries & transactions taking place in South Africa are from the Gauteng area. This is not surprising when over 40 % of our website visitors are from this region; the market is seeking a hassle free luxury property investment that is fairly easy to get to.

The most popular choices are secure gated resorts that are serviced & managed to a high standard; these properties tend to be situated in high growth areas such as golf resorts, wine & game farms as well as sought after costal resorts with a mix golf & beach access”.

Currently in South Africa many of the resort brands such as Zimbali, Pinnacle Point, and Arabella are predominant in the requests for fractional property, this is due to the on-site amenities such as golf, children’s facilities, health spa’s & beach access, and such amenities are becoming a prerequisite amongst families. The DINK’s (Dual Income No Kids) crowd are looking at luxury serviced apartments in urban areas such as the Emperor in Sandton, Horizon bay in Blouberg, Dockside &  Cape Royale in Cape Town CBD.

Corporate South Africa is also showing allot of interest fractional property, these can be used for business trips as well as staff incentives and hospitality events.

When the concept of fractional ownership first is introduced, many at initially comment ‘Oh it’s like timeshare right ?’ the answer is yes, the usage rights are similar, however with timeshare you are purchasing just that, a ‘definable use of time’ in a resort that is linked to an exchange program. The clear difference between timeshare & fractional ownership becomes apparent when you consider that with fractional ownership you actually own a share in a property, the usage is one of the benefits on your investment, your share can be passed on to your family to enjoy, you can sell your share with a simple sales of shares agreement, the cherry on the top is that you over the medium to long term you are likely to see a fair return on your investment capital as well due to the fractional properties being situated in high growth areas.