Luxury Property at a Fraction of the Cost

Is fractional ownership the answer to buying luxury property in today’s fragile worldwide economic climate? Well if you have ever drooled over a fantastic property you know you can’t afford, then this may be the answer to your wishes.

Fractional ownership basically gives you co-ownership of a luxury property with other people. It is similar in concept to shared ownership, which allows people to get onto the property ladder by buying a share of a home they may not otherwise be able to afford. But unlike a timeshare, which only gives you the right to use a property for a certain period of time, fractional ownership means you legally own a percentage of the property.

Nick turner, vice president for business development at the Registry Collection, Europe believes the concept of fractional ownership is a good option for people who want access to luxury property, but don’t want the downside of buying and owning a property outright. He gives the example of a luxury 4 bedroom detached Villa in the beautiful Arcos Gardens golf and country club resort in Andalucia, Spain. The villa sits in one third of an acre overlooking the golf course. It has air conditioning and under floor heating throughout the house, open fireplace 10 x 5 meter swimming pool, Jacuzzi and top of the range kitchen fittings. The asset value of the whole property is £1.3m euros “Arcos Gardens has a low entry level of £199,000 for 1/8th ownership, which gives you the right to visit the property 6 weeks per year. Weeks are not fixed, but are flexible and split up fairly giving each owner 2 weeks in high season, 2 weeks in shoulder season and 2 weeks in low season,” explains Turner. This price includes taxes, furnishing and legal costs. Each owner gets a share certificate stating the fraction they own.

Golf fans...

Or for Ryder Cup enthusiasts, you can now play the famous Palmer Ryder Course and stay regularly at the K Club when you buy a property in the grounds of the fabulous 550-acre estate near Dublin. The K Club is now working in partnership with leading co-ownership specialist Firstlight to offer exclusive fractional ownership of luxury properties located on the edge of the golf course. The 33 fractional properties consisting of 2 and 3 bedroom duplex apartments, and 3 and 4 bedroom detached private residences are available with deeded equity. Introductory prices for the properties range from €131,500 (£108,100) for an eighth share in a 2 bedroom apartment up to €330,000 (£273,745) for a 4 bedroom house.

Sarah Warrington recently took the plunge as a fractional owner. She fell in love with the island of Samos in Greece and felt fractional ownership was more suited to her needs. She has bought a property in the 5 star Halcyon Hills resort, which is set for completion in 2012. Sarah will get 4 weeks per year usage and is likely to exchange her 2 weeks in low season for two weeks in another resort. She plans to visit with family and friends. Her family are based in Australia.

How it works in practise

As well as the benefits of acquiring a slice of a luxury property at a fraction of the cost, there is the additional benefit of sharing ongoing resort maintenance costs, which in the case of Arcos Gardens is approximately 200 euros per month. And if you don’t fancy going back to the same place each year, you can put some or all of your weeks into an ‘exchange pool’ whereby you can swap them for a week in another resort. For example, The Registry has 40,000 fractional owners on their books and offers 175 resorts to choose from so you can swap your week in the sun, for example, to go on safari, take to the ski slopes or indulge in a shopping trip to Dubai.

So what happens if you want to sell? According to Nick Turner, ownership regulations tend to vary slightly in different countries but generally speaking your first step would be to offer your share to one of the other owners in your property. In addition, some resorts will offer a resale service which will market your share to a wider audience. “Many of the newer resorts will also offer the option, say, after a 15 year period and with the agreement of all owners, to put the property on the open market. So there are two or three exit plans for owners,” explains Turner. The price you receive will, of course, be subject to current market conditions, and while a fractional ownership purchase should be based on lifestyle rather than investment potential, there is the possibility you may achieve some capital value. Any growth will of course be limited to your share of the property, as will any losses.

In terms of financing, fractional ownership is not generally suitable for a mortgage. However, there are specialist brokers available should a loan be necessary. In the UK, for example, it is possible to raise up to 75,000 euros, but most fractional owners use a combination of savings and equity in existing property they have.

The future

There is no doubt that the idea of fractional ownership is growing. In part this is because the current economic climate is giving property buyers pause for thought and fractional ownership offers a viable option. On the sell side, it is increasingly seen as a way for current property developments to sell existing unsold stock.

The Registry says it is expecting to have dozens of exciting luxury resort opportunities available over the coming months in Italy, Portugal and the Alps. A particular gem according to Turner is the Machrihanish Dunes golf resort situated in the Mull of Kyntyre, Scotland where for £50,000 you can acquire fractional ownership of a 2 bedroomed property overlooking the golf course and sea.

So If you like the idea fractional ownership then ExpatMoneyChannel has put together a Guide to Fractional Ownership, which includes some key points to watch out for.

For further information:

The Registry

K Club