Frac­tional own­er­ship? We’ll have a piece of that

Buy­ing a part-share in a hol­i­day home abroad is sim­ple, stress-free and prof­itable, says Chris Wil­son. Just don’t call it time­share

The Daily Telegraph - Property - - Overseas -

The old rules about buy­ing sec­ond homes are be­ing torn up and thrown out of the win­dow. As of last month, “it no longer makes sense to own your own hol­i­day home”, says Bernardo Moya, of Pres­ti­gious Prop­er­ties. Mak­ing money out of your prop­erty abroad through frac­tional own­er­ship is the next big thing.

In the United States, frac­tional own­er­ship is the fastest-grow­ing seg­ment of the prop­erty mar­ket — and now it is catch­ing on here. “The fi­nan­cial changes that are com­ing in will trans­form the mar­ket,” says Les Mil­ton, of the Frac­tional Own­er­ship Con­sul­tancy. “2007 is go­ing to see a burst of ac­tiv­ity in this type of own­er­ship.” Changes to the way frac­tions can be pur­chased will put a hol­i­day home within reach of just about ev­ery­one and it can be very lu­cra­tive. “You can have a place in the sun for the price of a health club mem­ber­ship for two – and you can make money out of it ev­ery month,” says Bryn Thompson, of Span­ish Quar­ters.

Frac­tional own­er­ship has been around for nearly 20 years but it has al­ways been in the shadow of its evil cousin, Time­share, a con­cept that makes ev­ery­one in the in­dus­try shud­der. “We are noth­ing at all to do with time­share,” in­sists, well, ev­ery­one in the frac­tional own­er­ship busi­ness. Yet de­spite a long and con­vinc­ing list of ad­van­tages over con­ven­tional prop­erty pur­chase, un­til now frac­tional own­er­ship has ac­counted for a only tiny per­cent­age of prop­erty sales for Bri­tish cit­i­zens up. Un­til now.

Matt Dim­by­low got in on the act rel­a­tively early — in 2004. “We knew peo­ple in the States who told us about it,” says the man­age­ment con­sul­tant from Cheshire. The pos­i­tive ex­pe­ri­ence his friends had in Colorado in­duced him to look for it in Europe and al­ready he is buy­ing an­other frac­tion on a sec­ond de­vel­op­ment in Por­tu­gal.

“Frac­tional own­er­ship is bril­liant,” he en­thuses. “I’d rec­om­mend it to any­one. We’ve got all the hol­i­day we can han­dle in a place my daugh­ters love and we’re mak­ing money out of it.”

Even the most cau­tious fore­cast­ers see prices in Spain and Por­tu­gal con­tin­u­ing to rise at about 5 per cent per year. So as well as be­ing able to pur­chase a share in a prop­erty for a frac­tion of the cost of buy­ing a house out­right, the Dim­by­lows have al­ready seen a 20 per cent cap­i­tal ap­pre­ci­a­tion on their in­vest­ment in just two years.

Mr Dim­by­low is not alone in his praise of frac­tional own­er­ship. Top of the list of its ad­van­tages is the ef­fi­ciency. The av­er­age work­ing per­son in the UK only gets five weeks’ hol­i­day a year. Even the very lucky can’t man­age more than eight weeks a year and yet if you buy a prop­erty abroad, you are pay­ing for the whole year. On top of that, with frac­tional own­er­ship, be­cause you are only buy­ing a part-share of the prop­erty, you can af­ford to buy some­thing much nicer than you could ever fund out­right.

“Our top-of-the-range pack­age is less than €400,000,” says Brigitte Ur­bano, of de­vel­op­ers Ocean­ico. “And for that you are get­ting a quar­ter of a very lux­u­ri­ous villa.” The cost of that villa to a sin­gle pur­chaser would be well over €1 mil­lion. In ef­fect, you are spread­ing your in­vest­ment and get­ting you a su­pe­rior qual­ity hol­i­day home.

An­other big at­trac­tion is the fact that you are buy­ing into prop­erty run by a man­age­ment com­pany. You don’t have to worry about what is hap­pen­ing to your home in your ab­sence; you ar­rive to a clean, aired prop­erty with all the sup­port you need.

“That was al­ways a big prob­lem with us,” says El­iz­a­beth White, who has just sold her house in France be­cause she is buy­ing into Span­ish Quar­ters, a de­vel­oper in An­dalusía. “We were al­ways wor­ry­ing what was hap­pen­ing when we weren’t there, which was nine or 10 months a year. We were bur­gled sev­eral times, the place was in­fested with rats and it al­ways needed a day’s clean­ing when we ar­rived — and don’t get me started on the gar­den.” Those are the sort of wor­ries that don’t ex­ist with frac­tional own­er­ship.

So how can you get your­self a piece of a frac­tional prop­erty? Un­til re­cently, one of the lim­i­ta­tions of the scheme was that you had to fund your pur­chase of a share with cash, or by bor­row­ing on an­other as­set. It is, for ob­vi­ous rea­sons, dif­fi­cult to bor­row for a part-share of a prop­erty be­cause banks were not able to se­cure the whole prop­erty for re­sale in the event of a de­fault.

But what makes frac­tional own­er­ship very in­ter­est­ing and within reach of most peo­ple, is the fact that from last month, it has be­come pos­si­ble to buy your frac­tion with a mort­gage from a Bri­tish lender, pro­vided you buy from a de­vel­oper that uses a pack­age de­vel­oped by the Frac­tional Own­er­ship Con­sul­tancy.

“The ar­rival of the Manch­ester Build­ing So­ci­ety is the rea­son why this mar­ket is go­ing to get a lot big­ger,” says Ewa Peters­son, of de­vel­op­ers Vi­gia in Por­tu­gal. It is go­ing to be able to of­fer loans of up to 70 per cent on a frac­tion of the house given the as­sur­ance that it can sell the share on the open mar­ket with­out hav­ing to sell the whole prop­erty.

But what is the en­try-level price? The cost of sec­ond homes in the more de­sir­able ar­eas of Europe has been rapidly in­creas­ing over the past 10 years. A place in the sun isn’t such a cheap op­tion any more but with frac­tional own­er­ship you can get a foot on the lad­der for €36,000 in a new de­vel­op­ment on the coast or a top golf course in Por­tu­gal. Bryn Thompson, of Span­ish Quar­ters, of­fers part-own­er­ship of apart­ments in An­dalusía for £158 per month.

So what are the pos­si­ble pit­falls? With frac­tional own­er­ship there is an ob­vi­ous lim­i­ta­tion in the dates of your hol­i­day. Be­cause of the fixed rota, you can’t go to your house all Au­gust, ev­ery Au­gust: you will be re­stricted by the sched­ule.

But per­haps the sin­gle most im­por­tant lim­i­ta­tion is the type of prop­erty avail­able. The over­whelm­ing ma­jor­ity of prop­er­ties avail­able to pur­chase frac­tion­ally are new-build vil­las or apart­ments. So, if you want to ren­o­vate a ru­ined tower at the top of a hill in Italy with no roads or elec­tric­ity, frac­tional own­er­ship is not for you. Leave it to the peo­ple who want to have an eas­ier life — and make a good in­vest­ment out of their hol­i­days.

Yours, mine and ours: above left, the Amen­doeira golf re­sort in Por­tu­gal, which of­fers frac­tional own­er­ship homes; top right, Matt and Emma Dim­by­low, with chil­dren Lauren and Ella, and (above right) one of the schemes they have bought into

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.