Holiday Homes Portal News

Shared vacation ownership - without the headaches

Date: 28/09/2009
Article source: www.sapropertymonthly.co.uk

By Liezl Maclean

Shared vacation ownership gives you all the comforts of a luxury holiday home without the chore and expense of maintaining it.

So you enjoy your family holidays. In fact, you enjoy them so much that you are considering investing in a holiday home in South Africa. Something extremely luxurious and very private.  Perhaps a place with a personal lift and your own butler or two. Some place where, at your request, someone can shop for your groceries, dry clean your clothing, make your restaurant reservations and heat your private splash pool.

Dreams are good friends! You might be thinking something like this is way out of reach for us mere mortals. Besides, with the current economic downturn, who is able to afford their own holiday home with such humble pleasures anyway?

In addition to the monthly bond, your holiday home will need to be maintained and cared for. Not wise if you are a thousand miles away.  But if you prefer all the paraphernalia of a traditional luxury lifestyle without the chore and expense that full ownership entails, fractional ownership allows one to experience all the privacy and comfort of a holiday home at a fraction of the cost.

Fractional ownership is one of the new property buzz terms in South Africa. Feedback from key global players is that the South African fractional market is about to explode on the global map, with more international investors buying their shares in rands.

Part of the appeal is the fact that it is completely hassle free as you never have to worry about repairs, maintenance or housekeeping.

“The current economic climate, together with the fact that most consumers have limited access to capital, is pushing the possibility of owning 100 percent of a family holiday home out of reach,” says Dirk Wilson of fractionalownership.co.za. “Coupled with this, consumers are now acknowledging the financial benefits of fractional over whole ownership, driving demand for more vacation ownership options at the resort of their choice.”

Wilson also points out that the formation of the Vacation Ownership Association of South Africa will help consumers understand the different shared ownership products on the market and how they differ. According to Wilson, many local resorts themselves are now releasing a bouquet of shared vacation ownership opportunities into the market, such as fractional ownership, private residence clubs and timeshare, to meet the needs of consumers’ pockets as well as service expectations.

Now at this point you might be asking, what is the difference between these vacation products - and how does each one work?

To summarise the shared vacation ownership purchase options, such as timeshare, fractional ownership and private residence clubs, Wilson uses the comparable of walking into a Mercedes showroom – you have the option to purchase a vehicle that specifically suits your usage needs. “For example, if you want an entry level model you can probably get one, should you want a higher level of comfort, you might choose a model with more features - however this will come at an extra cost. Then if you want a top of the range performance sports car, you can probably order one.”

“Now as much as you have flexibility with the model of vehicle you desire, you have flexible property purchase options as well. You can choose to lease the property, pay cash or finance the purchase,” Wilson explains.

A shared vacation ownership purchase has the same principals; you have a variety of products to choose from depending on the combination of your lifestyle, ownership and usage requirements.

Timeshare

Timeshare can be defined as ‘the right to use time’ in an apartment or holiday home for a specified number of years.

According to Jackie Bauermeister, National Operations and Fractional Ownership Sales Manager of Pam Golding Properties, the biggest advantage of timeshare is the fact that purchase price is relatively low when compared to fractional ownership and you have the flexibility to use your time when and where you choose subject to availability.  But on the flip side Bauermeister advises that timeshare is more often than not the “right to use” and does not involve direct ownership of the bricks and mortar.

“Timeshares have also proven to be very difficult to sell in the re-sale market and those that succeed attract substantially lower resale values compared with the initial purchase price,” Bauermeister says.

According to fractionalownership.co.za, timeshares are situated within a managed leisure resort environment and typically are sold in one week or multiple week increments starting at around R25 000 for one week’s usage right.

Fractional Ownership

Fractional ownership, on the other hand, represents the two aspects that South Africans always want; leisure use and ownership, in short it combines the best of both.

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

The property is then managed on behalf of the investor owners and is enhanced by the addition of all sorts of value added services. The properties are exquisitely furnished to hospitality standards and include luxury items such as plasma TV, surround sound, golf carts and so on. “Fractional ownership permits entry into some of South Africa’s most exclusive resort destinations at a fraction of the price,” says Bauermeister. A further advantage is that all aspects of property ownership are managed on your behalf.

Owners make use of their properties on a pre-determined roster of use that rotates to ensure that all owners have equal value. In addition, like your normal residence, your fractional can be willed to your children and similar to your normal residence, you can sell your fraction at any time.

This is echoed by Wilson, “Traditional fractional offers you a direct shared real estate purchase in a specific residence, with time usage allocation, plus the option to rent out, or exchange your allocated time into a network of fractional specific exchange resorts around the world.” 

“You can exit by selling your share, your base share value will typically be determined by the increase or decrease in the actual property you have bought into,” he says.

Bauermeister points out that a disadvantage of fractional ownerships is the lack of financial vehicles available through commercial banks to assist with the purchase. “This is due to the fact that proof of ownership lies in a share certificate which cannot be used as a security against a loan,” she explains.

Private Residence Clubs

Typically private residence clubs offer the same advantages and disadvantages as fractional ownership as the concept and structure of ownership is the same. The difference is that private residence clubs offer a much higher level of luxury and are supported and managed by a renowned hospitality/hotel operator.

“Services available to private residence clubs can include limousine airport transfers, private butlers, maids and chefs and use of resort toys such as yachts and helicopters to name but a few,” Bauermeister says.

Wilson states that the overall feel is quite distinct: a timeshare stay could be equated to borrowing a friend’s condo; a private residence club visit is more like renting the largest suite at a five-star resort, then adding a full kitchen, and few more bedrooms. Concierge services and exclusive access to golf courses is common, and not surprisingly, most well-known private residence clubs feature acclaimed five-star hospitality brands such as Ritz-Carlton, Four Seasons, Pezula or Zimbali, to name but a few.

The residences are equipped to the very highest standards of luxury.

All of the above schemes are an investment in leisure time and holidays, which implies that if you take regular family holidays every year for 14 days or more and typically rent private villas or make use of hotels, this money could be used wisely in investing into your own holiday home. “Fractional ownership is great investment in leisure time and is an excellent way to secure your future holidays at today’s prices,” Bauermeister enthuses.

“Research undertaken by fractionalownership.co.za during 2008 indicated that over 54 percent of South Africans spend 14 days or more holidaying each year with an average expenditure of R42 000 on accommodation.”

She continues, “An average fractional ownership share costs R350 000 which means that the fraction will pay for itself in just over eight years, excluding the monthly levies.”  Wilson stresses that a shared vacation ownership purchase is a lifestyle investment. If your motivation is to achieve a better quality of life, it might be just what you are looking for.

“Investors need to be sure of what their envisaged long term usage and exit objectives are before they put pen to paper,” Wilson advises, “In today’s economic environment beware of any guaranteed returns, and know your exit options should you wish to exercise them.”

If you are looking to make a lifestyle investment, a shared vacation ownership might provide you with the perfect setting for those little getaways that make you forget about the hustle and bustle of the city. It’s a great way to secure your future holidays at today’s prices - and you’ll have the peace of mind that it is maintained and cared for while you are not there.