SA has the lion's share of the fractional ownership market in Southern Africa

Source: fractionalownership.co.za

Quantifying the Southern African Fractional Ownership Market

The 3rd Annual Fractional Ownership Conference was held in Cape Town recently, attended by over 130 key delegates from the vacation ownership sectors. Dirk Wilson, co-founder of fractionalownership.co.za and organiser of the conference, said he was pleased to see the optimism shown by the major payers “who are firmly focused on the light at the end of the tunnel, with an upturn in the property market foreseen for the second quarter of 2009”. Wilson presented interesting information at the conference, quantifying the current status of the fractional ownership market in Southern Africa.

Fractional ownership in South Africa is generally perceived to be exclusively applied to luxury vacation residences; however, the concept is now also being applied to luxury leisure use assets such as helicopters, private planes and boats. Says Wilson: “One company in Johannesburg has sold 6 private planes by fractional ownership and is busy selling their first helicopter; a company based out of Cape Town has recently completed the sale of a R15m luxury cruiser on fractional and is now moving onto their second boat. We have been talking to a company based out of KwaZulu-Natal (KZN) offering super-cars on a fractional ownership and shared usage structure.”

He outlined the number of active players selling assets on fractional ownership in the South African market as follows: vacation residences – 34 companies with 120 + different residences to choose from in over 41 destinations throughout Southern Africa; 1 company with 7 aviation products;  2 companies with 2 top-end boats, and one company putting final touches to their super-car club.

Wilson says the number of fractional ownership companies involved in the residential sector has dropped dramatically in the last 6 months. “There were 64 companies active in the residential market 6 months ago, which has dropped to 34 today. This is a good thing, because it was evident that there was something of a ‘gold rush’ to market. Droves of developers and agents had the perception that a residence that was not selling on the whole ownership market would automatically sell on the fractional market. They could not have been further from reality.

“To operate in the pre- and post-sale fractional market, you will be required to implement management and hospitality support infrastructure for a minimum of 20 years. For the South African market to maintain long-term sustainability and keep its position as the world’s second most established fractional sector (after the USA), it is imperative that new entrants in the market understand what their long-term obligations to their projects are, and are prepared to conduct essential research before they launch a product into the market. For example, after the shares have been sold, how they plan to appoint a management team to service and maintain the asset, as well as support shareholders with the highest levels of service for very long time.”

In terms of the volume of fractional residences available on the market in Southern Africa, South Africa has the lion’s share of the market (90%), Mozambique 3.3%, Mauritius 2.5%, Seychelles 1.6%, Tanzania 1.6%, and Namibia 0.8%. In South Africa alone there are an estimated 41 lifestyle destinations/resorts, towns and areas where fractional ownership residences are available. When looking at the volume of residences by province, this time the Western Cape has the lion’s share with 47%,  KZN 18%, Limpopo 15%, Eastern Cape and Mpumalanga 5% each, Northern Cape and Gauteng 3% each, and North West and Free State 2% each.

The top five Western Cape fractional resorts/areas in terms of number of residences are Pinnacle Point in Mossel Bay, V&A waterfront and Blouberg in Cape Town, Sparrebosch in Knysna and Arabella in Hermanus. What makes these destinations so popular, Wilson says, is that fact that they are all situated near the ocean, on a golf estate, or both. “It is also apparent that there are three key commonalities to the majority of fractional sales to date: over 80% of residences were situated on a golf estate; while over 60% were situated on a golf estate with direct beach access. Also important is that the top five resorts mentioned have a major hospitality provider already operating there. This is what the consumer is after and where the successful market is.” Fractions also have to be accessible, i.e. within 5 hours’ drive of a major airport or city.

When looking at the shareholders in the South African market, Wilson said it is ‘A tale of five fractional resorts’. San Lameer on the KZN South Coast has sold out 85 units on fractional, and has 875 shareholders. Zimbali on the KZN North Coast has sold 40 units, with 23 now complete and in operation, and 520 shareholders. Zebula in Limpopo has sold out all 30 of its fractional units, with 193 shareholders. Pinnacle point has sold out all of its 30 fractional units, with 169 shareholders, and Pezula Private Residence Club in Knysna has sold out its 5 fractional units and has 75 shareholders. The grand totals are 190 resort units sold, 173 currently in operation, and 1834 shareholders.

Wilson says there is global interest in Southern African fractional offerings, as recorded on fractioanlownership.co.za. “Most (74% of total enquiries) some from South Africans, and then, in descending order, from the UK, USA, Canada, Australia, The Netherlands and United Arab Emirates. Again there is a common denominator: “There are so many expats looking to reinvest in South Africa who want a property investment and vacation usage here – but not necessarily a whole house with all the headaches that come with managing a residence remotely!”

Which countries and resorts/areas are most consumers currently interested in? Wilson lists the ‘Top 10’ fractional resorts in South Africa, in descending order, as: Zebula, San Lameer, Pinnacle Point, Zimbali, Mozambique, Elements, Zanzibar, Langebaan, Arabella, and the V&A Waterfront. “The fractional consumer is clearly more attracted to resorts that are in operation, and where access to use of their residence and the resort amenities is immediate.”

What is going to boost consumer interest in fractional ownership opportunities going forward? Wilson cites the following three essentials: consistent, top-level hospitality services; inter-portfolio and/or global exchange networks (value for value, e.g. you buy a share in Zimbali and can trade your future unused time for time in another resort of a similar standard overseas or locally, and specialized end-user fractional ownership finance geared to buying fractional assets.

For more information please contact Dirk Wilson on 021 556 5032 or dirk@fractionalownership.co.za; see www.fractionalownership.co.za