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Recent articles

Why should agents and developers in Dubai be embracing the concept?  >>

What makes a successful fractional ownership project?  >>

Fractional ownership and the luxury lodge sector  >>

Key considerations for fractionalising an individual property  >>

Fractional ownership in the UK  >>

The logic of urban fractionals  >>

The growing popularity of hotel room investments  >>


What makes a successful fractional project?


Several key factors will always be relevant for a successful fractional offering:

 

Location

Fractional buyers seek accessible destinations that they will want to return to - typically, beach, ski, golf and city locations.  There is a trend for interest in fractional ownership extend from top end luxury properties with the highest quality amenities and concierge services to mid market properties aimed at families.


Clear and easily understood structure

At a time when fractional ownership is still a relatively new concept in Europe, transparency is key to the success of a fractional product.  Regulations introduced in Europe in February 2011 now offer greater protection for fractional buyers.


Flexible usage

Most popular schemes now incorporate rotating calendars, a bespoke reservation system, or a combination of the two.  It is important that the usage rights strike a balance between certainty and flexibility for prospective owners.


Exchange programmes

Most large resorts and many smaller ones allow owners to exchange their usage rights with resorts around the world.  Most exchange programmes are operated by large organisations such as RCI and Interval.  


Consumer finance

Financing the purchase of a fractional interest has never been easy for non cash buyers, or for those buyers who are not been able to raise capital on other property. As the fractional concept becomes more established, lenders are beginning to recognise its potential.  Developments with arrangements in place for ‘buyer finance’ will attract a wider range of prospective buyers.  


Absolute clarity on ownership costs

Buyers want to be clear before they buy what the annual maintenance and management costs will be and how much control they will have over any increases.


Exit route

Buyers will want to be comfortable with the potential for cashing in their investment. Whilst most schemes will allow for the sale of fractions, normally by offering them to the other owners first, the market for existing fractions is in its infancy. Some schemes may provide for the sale of the property after a fixed period, perhaps 8 years, which at least gives an owner a guaranteed exit.