Fractional Ownership News

Why fractional makes sense

Date: 28/09/2009
Article source: Property 24

Many areas have seen enormous growth in property value over the past few years; for example, owning an apartment in Blouberg today could easily set you back millions. While this might seem out of reach, with fractional ownership you can now get all of the benefits and privileges of property ownership and save 90% of the costs. Thys Geyser, Managing Director of Pam Golding Fractional Ownership, explains.

“Fractional ownership is merely the evolution of the well-known residential syndicate, in other words the shared ownership of an asset by pooling resources and costs. Syndicates have been used in South Africa as a form of leisure property ownership for years, focusing on game farms and golf resorts or family beach houses. The problem with syndicates, however, was who was to take responsibility for managing the whole set-up, and what did you do when you wanted to exit the deal? With fractional ownership the entire turn-key project is now offered on a professional level with all these aspects taken care of.

“In essence, fractional ownership is the joint ownership of a luxury asset - usually one with a high monetary and aspirational value - where the cost of acquisition, maintenance and usage is shared according to a structured agreement.

The property is then managed on behalf of the investor owners, and enhanced by addition of all sorts of value-added services. A promoter like Pam Golding Fractional Ownership provides the investment opportunity and also manages the entire process.”

Services which form part of typical fractional products include: financial management, of all financial matters, with expenses paid, levies collected and returns made on owners’ behalf; housekeeping and hospitality, with the properties serviced and maintained on site; exchange and rental facilities for unused time; and value-added services such as exchange programmes and use of other luxury assets in the same offering.

Geyser says that fractional ownership is “an excellent investment in lifestyle, with the added advantage of being underpinned with a property profile, hence allowing for capital appreciation. In the worst-case scenario you will have the benefit of use and get your money back when you sell; in the best scenario you will have the use value and at least the normal property appreciation on your share. In our experience this capital growth can exceed 15% per annum if you buy right.” He says that as with any purchase or investment, the end result is a function of the initial decision. “We have seen up to 20% appreciation in Blouberg and San Lameer and 24% at Pinnacle Point over the last year.”

From experience Geyser says that clients prefer to invest where the brand value of the underlying destination is well known, such as known and rated golf estates like San Lameer, Fancourt and Pinnacle Point; apartments where the units are on the beach, like Blouberg; and countryside breakaways where there are activities for the whole family, like Hermanus or the Drakensberg. Current recommended buys are San Lameer in KwaZulu-Natal at R260,000, Pinnacle Point on the Garden Route at R345 000, Blouberg at R240 000 and Alpine Heath, Drakensberg, at R199,000.

He adds that the best method to determine the investment value is to assess the ‘payback period’ - in other words, how long it will take to repay the initial capital purchase sum with the annual usage value.