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ITALY
reguLaTIon, FInance and Image
Fractional investment still has a number of regulatory hurdles to jump – as well as the ‘timeshare’ problem with its image. A trade association has recently been founded, the Fractions and Shared Ownership Trade Association (www.fsota.org), which should help address many of these problems. But fractional ownership is affected by the EU Timeshare Directive – vendors must offer a 14 day cooling off period, and cannot sell fractions as an investment. In fact Piers Brown is very wary of selling
fractional as an investment. “In my mind, fractional is a combination of lifestyle and property purchase; access to a luxury property at a fraction of the price. If you’re looking for investment, there are better investments out there than fractionals.”
Above: Castello di Casole in Tuscany, Italy offers style and seclusion, available through Timbers Resorts www.timbersresorts.com Left: Villa San Guiseppe in Italy available through Rocksure www.rocksureproperty.com.
On the other hand fractional investment can free a purchaser’s money up to work harder in other asset classes – if property turns out not to be the best performer over the next few years. Brown is also worried that some
Most importantly, fractional owner- ship creates a year-round resort population, resorts that have no ‘buzz’ don’t
last long.’
Les mILTon FracTIonaL oWnershIp
fractions give the buyer a poor deal. While most fractions sell at a 20-30 per cent premium to the price of the same property wholly owned, he has seen some developers trying to achieve a 200-300 per cent uplift. “That’s outrageous, it’s people just jumping on the bandwagon,” he says. “Transparency and prudence are two words we’re going to be hearing a lot about over the next few years,” he predicts, and while that could help the fractional industry – by making purchasers concentrate on getting value out of their investment – it could also damage it, if disreputable dealers try to get in on the act. Another issue with fractional is lack of
finance; unsecured lending is available to purchase fractions, but mortgages are not. David Burden comments that, “In Italy you can’t have a mortgage on a fraction; in the US you can.” However, lawyers are now conversant with fractional – they’re no longer a bottleneck for purchasers. And there is, as yet, no real resale market
for fractions in Europe – that’s still a big issue facing the industry. However, Fine & Country has just announced plans to sell fractional alongside normal property sales – and the involvement of mainstream agents should help create a resale market.
Resale is one area where the funds, like
Rocksure, have an advantage as they sell up the properties after seven or 10 years, and distribute the funds to the shareholders.
second home purchases
There is now widespread consumer interest. Piers Brown says, “From the consumer perspective our web traffic has more than doubled to 1.3m hits,” and the Fractional Expo grew from 100 delegates to 210 last year and is expected to see further growth this year. Les Milton points out that fractional isn’t
just a temporary quick fix for developers stymied by the credit crunch – it’s already demonstrated staying power. “Over the last five years, that is, before we entered the global recession, fractional ownership has been the fastest growing sector of the US property market,” he says. “Growth has been five-fold over the last 5 years.” That’s made it a USD 1.6bn market. And David Rogers believes fractional has
much, much further to go. “Right now, the prevailing model is that you sell a whole house to someone who’s got the money to buy it outright. That’s the old way,” he says. “Your grandchildren will think that’s a damned stupid thing, something their grandparents used to do! Fractional ownership is the future of overseas property for the British market.”
Add your own opinions to the debate:
www.propertydrum.com/articles/fractional
PROPERTYdrum MARCH 2010 19
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