Words: Ashley Rigg
Published: 14th 2010
Why fractional is an emotionally flawed product
Margaret Thatcher won over the hearts and minds of the British working class by promising us the right to buy our own homes in 1979.
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User Comments
Personaly I think fractionals are a good thing having spent last season selling over seas property by phone and talking to many a I wish I Could afford it brigade, this has to be a great selling point and may I remind you all credit cruch stage 2 is around the corner as interest rates are still low by goverments wishes only sooner or later they will rise and with it many more companies and personel will go under as they just survive now. So if you want a holiday home with min risk and out lay this has to be the way forward.
Mark Smith,
Property Partners
Thanks for your comments guys. I’m 100% sold on fractional but I think it’s a mistake to assume UK consumers are, that was my point.
Ashley Rigg,
Global edge
I respectfully disagree that fractional real estate is emotionally inferior. What we are facing is a lack of awareness and education. While there might be a certain tiny segment of the second home buying public who think fractional is inferior, the majority of savvy buyers will eventually understand the practical and responsible nature of the product. Almost every major luxury brand now sells fractionally - Ritz Carlton, St. Regis, Four Seasons, Fairmont etc. - they don't offer it because it's inferior. In Aspen, one of the most upscale towns on Earth, fractional is outselling whole ownership. When the distressed whole ownership market is gobbled up by the bottom feeders and when fractional developers stop trying to double the price per foot and settle at a 1.3 multiple then fractional will emerge as the top selling segment in the resort real estate industry.
Eric Pierce,
Pierce Group
Another story about Fractional Ownership from someone who has NO idea what they are talking about! This story reminds me of a real estate sales rep that I had working for me about 15 years ago who kept trying to convince me that the internet was just a fad and won't be around in the future!
Robert,
Pestello
I agree that the numbers do not lie. The same Ragatz research shows that in 2008 - the first year of the economic downturn - the shared ownership industry (Private Residence Clubs, Fractionals and Destination Clubs) decliend 34% compare to 2007. In the same period the sales of whole ownership vacation homes declined 41%. This shows that the shared ownership industry is holding up better that the whole ownership alternative. Maybe it is because the buyer is becoming more intelligent and is now looking to "buy what I use" instead of having that million dollar vacation home stand empty for 8-10 months of the year. I am among the strong believers in the Fractional and Private Residence Club concept where we so far have only scratched the surface.
Preben Vestdam,
Valhalla Associates
I couldnt dissagree more. If anything the opposite is true. Traditional Whole ownership for a second home is flawed. it was never meant to be owned whole ownership unless you plan on living in it most of the year. The proof in North America (and surely in Europe) is that second homes sit empty an astonishing 86% of the year according to the NAR (National association of realtors 2007 study of 8.1M second homes). why own THAT as whole ownership and pay all ogf the costs. The greater fool theory? that a higher appreciated price will make it work financially? wrong!! I could easily make 20 points why im right. Whole ownership of second homes is inferior. the answer is in Resort Owners Groups revolutionary model of optimized second home ownership using fractional as its foundation.
gary Carter CEO 416.410.5999
Gary Carter,
Resort Owners Group
So we all believe whole ownership overseas sales can continue at the pace of 2006 / 7 with the current distinct lack of finance and oversupply in numerous locations around the world and there's no need to address alternative sales models - can't help thinking mixed-use resorts will be the way to go.
The US fractional market is still worth $800 million p.a., something the European market is aspiring to....with over 10k additional fractional units launching in 2010 the consumer will decide.
I know numerous celebrity fractional owners......some 'own' fractional companies too!
Piers Brown,
Fractional Life
Firstly, in our experience Fractional needs to be presented in the right way; everyones initial reaction is 'Oh its just timeshare in another guise'.
We face this objection head on by reassuring clients that time share is just holiday ownership, you do not own any part of a property at the market rate, so selling it will always be a nightmare. Fractional on the otherhand gives you full ownership rights to your chosen property for a fixed number of months in a year. This is backed up by a title deed and costs are shared equally by the owners and are not subject bto some inflated management fee dreamed up by a Developer or Resort owner. The emphasis should always be on transparency.
To us, Fractional is a closing tool to be used at the point of sale; many of our clients aspire to a front line beach property but their budget falls well short of reality. However, when questioned on the intended use of their property few will use more than 6 weeks per year and almost all have friends or family who could use lets say another 6 weeks. When we point out that few wholly owned properties are occupied all year round and yet maintenance costs still have to be met, all of a sudden Fractional begins to look attractive!
After all, who would argue that Fractional ownership of a boat is less costly than whole ownership and is targeted specifially at usage?
We are not trying to teach our grandmothers the gentle art of egg sucking, but we do feel that many of the problems experienced by companies trying to sell Fractional stem from a lack of understanding and a lack of training.
It is noy the holy grail of the property industry which will save everyone in recessionary times; it is a specific product geared to lifestyle which can reduce costs to just the holiday weeks used and provide a significantly enhanced holiday experience by allowing those clients with modest budgets to experience a little luxury!
Peter Mitry,
Egypt Real