In simple terms, fractional-ownership schemes are nothing new and mean that three or four friends can buy a home together. Legally, the property belongs to all the owners whose names are on the deeds, and time spent there is split accordingly. What it shouldn’t be confused with is a timeshare, where you essentially buy into a hotel complex and pay in advance for your holiday nights there.
The process has become more complicated of late, however. With fewer outright sales of homes, developers are now encouraging buyers to acquire a quarter, eighth, or twelfth share of a home with people with whom they have no connection. Fractional ownership is big business sales topped £1.39 billion round the world in 2008, and that figure is expected to double over the next couple of years.
As the recession bites, marketing departments are working harder to coax us into parting with our cash in fractional schemes that are morphing into destination or residence clubs, where you swap your weeks with other resorts and enjoy extras, such as the use of a boat, limousine service and free golf membership.
So is there a catch? Nick Turner from The Registry Collection, a company with 37,000 fractional owners using 160 five-star resorts worldwide, voices concern about the quality of some of the products on offer. ‘We are wary and looking only in tried-and-tested places. Some mainstream developers, particularly in emerging markets, see this as solution to shift inventory quickly.’ Mr Turner says a good benchmark is the ‘seven-day factor’ ‘if you can find enough golf, spa, tennis, beaches, restaurants, history and culture to amuse you for more than a week, then this could be a good buy.’
Fractional ownership is also a good purchase for those who don’t want the stress of upkeep, worry and waste of empty properties and restrictions on when they holiday. Europe’s premier fractional company, The Hideaways Club, offers different membership levels, where ownders pay from £6,000 to £12,000 a year to use top-notch homes across the globe.
Based on a points system, members can own a share in a portfolio of proprties and can upgrade points easily for more time in these high-end homes. The Hideaways Club offers a great deal of choice at a fraction of the cost of sole home ownership.
Many top-end house builders, including Palheiro Village on the Blandy Estate on the island of Madeira, are looking at The Registry Collection. Roger Still from Palheiro, where a quarter share in a one-bedroom apartment costs £109,000 and a three-bed villa £216,000, says if a deal is struck, Palheiro will pay for the first two-year Collection membership for fractional buyers (worth about £600), so they can swap some or all of their weeks with the 160 other resorts. If they wish to remain members, they will then pay about £250 a year after that.
‘We’ve taken a conservative approach,’ Mr Still explains. ‘You can see the property, proper management is in place, the golf course is established and a new spa opens in June. It’s not a pipe dream and ownership is straightforward you get a quarter of the freehold with your name on the deeds.’
Oceanico Prestige Residence Club, a hybrid fractional/residence club, has launched on the Algarve, where the biggest selling point is the group’s seven golf courses. Oceanico guarantees you six weeks at an Oceanico property for an eighth share in a limited company, including Amendoeira Golf Resort and Belmar Beach & Spa Resort on the edge of Lagos, with the option to use other
destinations in the portfolio, such as Little River Golf Resort, North Carolina.
Other elements in the ‘luxury’ package a limousine collecting you from the airport, a Sunseeker cruiser and a free set of golf clubs might appeal to some more than others. A one-eighth share of a three-bedroom villa at Amendoeira costs £160,000. Management charges vary, but average out at about £900 a week for your six weeks—not insubstantial when adding up running costs. However, you aren’t guaranteed your own home when you visit, but one of a similar standard.
In January, Nick West, a physics lecturer at Oxford University, bought a quarter-share of a two-bedroom apartment at Pestana’s Vale da Pinta for £57,000 with his wife, Lilian. Inspired by friends who bought at the same resort, and its excellent but unobtrusive security and mature landscaping, Mr West, who comes from Bournemouth, says the purchase ‘matches our budget and aspirations’.
Ask lots of questions about the ‘lifestyle’ package you’re offered, suggests James Harrison, sales director at Pestana. ‘What happens when the boat breaks down, the limo turns out to be a waste of time and the developer changes partners for swaps with other resorts?’ What worries Mr Harrison is ‘any confusion surrounding the deal’.
Confusion surrounds any credible ‘exit strategy’ the ease with which you can sell on your fractional too. Very few agents market fractionals as yet, and how they will be valued, particularly in the current quieter market, is up for debate. ‘It trips people up when they want to sell their share and find themselves competing with developers still selling similar homes at lower prices,’ Mr Harrison points out. ‘On the upside, this is a good way to get your toe in the water. I frequently get people buying a fractional, and once they get to know the place, they want to buy outright.’
Another upper-scale fractional scheme to consider is Timber Resorts’ Castello di Casole in Tuscany, where you can swap with six other places in the Timber Collection, such as Steamboat Springs, Colorado and The Carneros Inn, Napa Valley, for a twelfth-share of a well-restored farmhouse on the former Visconti Estate from £264,000 and management fees of £7,000 to £11,000.
Alternatively, why not consider the sensitive restoration of the14th-century village of Borgo di Vagli near Cortona, Tuscany, through Cluttons Italy? Titles are held by an independent trust company, and prices for 10% fractionals start at £57,000 for a one-bedroom apartment and £87,000 for two bedrooms.