Fractional Ownership News

leading economists talk at fractional conference

Date: 28/09/2009
Article source: The Perspective Magazine

Cape Town

August 22, 2008

By AUDREY D’ANGELO

 Two economists provided widely differing views on the outlook for the property market at a fractional ownership conference yesterday.

John Loos, a property strategist at First National Bank's home loans department, forecast an improvement in sentiment and said now was "probably as good as it gets", in terms of an optimal time to purchase property before prices begin to recover.  But Erwin Rode of property research company Rode and Associates forecast that "a long period of stagflation lies ahead" and it could last as long as five years.

"That means prices of houses will lag inflation. That is, if building costs go up by 8 percent, house prices will rise by only 4 percent in nominal terms."

He said this was the result of people in developed countries having lived beyond their means for many years on borrowed money.

Rode said fractional ownership was governed by the same regulations as time share. Although there were several different models, the main difference was that fractional ownership was so far confined to very up-market property.

He hoped this would remain the case and that banks would stay out of financing it. 

Dirk Wilson, the co-founder of fractionalownership.co.za and the organiser of the conference, said it differed from time share because investors acquired a share of the equity in a property and not only the right to occupy or let it at a certain period.  He said fractional sales were "doing quite well, considering the property market is down but we need more active participants [providing the properties]". The number of properties had dropped from 64 companies six months ago to 34 companies now.

There was a great deal of interest in southern Africa from overseas. Buyers were looking for properties available now - not in the planning stage - either in golf estates or on a beach. There must be hospitality facilities of a high standard, such as room service and a spa. Fractional title was a lifestyle investment.

Wilson said 74 percent of inquiries about fractional title properties in South Africa were from overseas - including from the UK, the US, Australia and the United Arab Emirates.  A great many South African expatriates wanted a property investment in this country but "not a whole house", he said.