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HomeProperty InsuranceHoliday Homes InsuranceIs Fractional Ownership the new Timeshare?

Is Fractional Ownership the new Timeshare?

The global economic crisis may be hitting the United Kingdom hard, but that hasn’t stopped a significant number of the population still dreaming of moving abroad or at least having a holiday home abroad. However, property markets in most European countries (including all our holiday home favourites such as Spain & France) are suffering at the moment. There is over capacity in the market and cash strapped Brits, facing declining equity in their UK properties are simply adopting a policy of – wait and see. But, what if you don’t want to wait, what if you want a property in the near future, after all it could be many years before the economy stabilises. There are still opportunities to be had for the purchase of a second or holiday home, bargains can be found now in most places, even in some of the most prestigious resorts, previously considered too expensive as many owners are forced to sell. One alternative method of ownership, that is catching on for want away Brits ,is Fractional or Shared ownership. For many people, not quite ready to up sticks and move, fractional or shared ownership represents one way of getting your foot on the property ladder abroad, without the usual large expense.

Its often difficult to justify the purchase of a holiday home abroad, particularly if, realistically , you will only be able to use it for a few weeks of the year. Many people find, (particularly, if they are still in full time employment) that visits to the property occur not as often as anticipated. Recently, there have been increases in air fares and the effects of the credit crunch have also meant that properties are not so easily rented, thus even if your holiday home is not being used by yourself, it may prove harder to rent than a few years ago.

Fractional ownership, originally devised in the United Sates of America, may provide a means for some of “having your cake and eating it” This type of ownership is one of the fastest growing areas of the property market at a time when property markets are stagnating in almost all countries. For a much smaller capital outlay, you can own a share in a property that you may not have been able to purchase out right on your own, or you could have a share in a much better quality property. This idea is catching on in European countries, with purchasers realising that they do not need to own a property outright to be able to enjoy its benefits.

The first thought that springs to most peoples minds when the concept of fractional ownership is broached is, “Timeshare”, well this is not the case, fractional ownership comes with full title to the property. With ownership, you will have ( hopefully over time) an appreciating asset because of the freehold nature of the purchase as apposed to the usual depreciating asset of timeshare linked to the typical right to use timescale. Fractional ownership properties are also your “standard type dwelling houses, not different from any other overseas home, whereas Timeshare properties, in the past have often been linked with inferior build qualities.

Who is it for – this type of ownership may be for you, if you fall in to any of the categories below.
You are prepared to accept co-ownership of a property under a managed scheme, with rules & regulations.
You want a second or holiday home but realise that, realistically you will not be able to use it for much of the year
You like the idea of a home abroad but have been put off by the cost.
You are interested in system where you are not solely responsible for all the up keep and running costs of a property that will only be used on a part time basis.

How it works – there are number of schemes available and many companies now specialise in this type of holiday home purchase. Individual research will have to be carried out as to the suitability of any one company. There is usually a minimum requirement of two owners but some groups can go up to twelve. Often, friends and relatives will group together to buy a property, but its not unusual for complete strangers to enter in to a shared purchase agreement. The organising company will take care of all the paperwork, they will introduce you to a range of properties available and then will advise , what shares are available. The number of shares available to you, will be linked to the amount of time you can spend in the property. The selling company will take care of all the paperwork for you and will manage the property on your behalf. Prior to purchase , it is of paramount importance to discover every bodies expectations with regard to the property, in reality it will be no point in joining a scheme where all the owners are families with children who will all want to use the property during the school holidays. All the terms and conditions of the purchase should be studied carefully and to be on the safe side, but your own legal advisor.

Your investment, can go up an down as property prices fluctuate and you do normally have the right to rent the property ( via the correct channels) for the period allocated to you that you do not wish to use. This may help to offset your purchase costs. As time progresses, you will of course be free to sell your asset or you may even have the option to buy more shares in the property. ( it is usual , if someone decides to sell, to offer it to the other shareholders first).

There will be some on going costs, associated with ownership, Apart from the management fee which varies according to the size of the share purchased, all running costs are shared between all of the owners, except for the utilities (Electric, heating etc.) which will be billed according to each owners individual usage. Again, prior to purchase its important to fully understand all of the charge applicable.

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