Fractional ownership opens up top-end market

Posted On Wednesday, 05 October 2005 02:00 Published by
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FRACTIONAL ownership, a new concept in residential property ownership launched last month by Domain Equity, could open investments at the top end of the market to a broader range of investors.

Nicola Jenvey

KwaZulu-Natal Correspondent

FRACTIONAL ownership, a new concept in residential property ownership launched last month by Domain Equity, could open investments at the top end of the market to a broader range of investors.

The move follows dramatic growth in the property market in recent years, where returns have outstripped bonds and equities.

But many potential investors are now priced out of the market, paving the way for fractional or syndicated ownership, says Domain Equity MD Graham Rodger.

Fractional ownership allows investors to reap the rewards of owning property without carrying all the financial responsibility or having to manage the investment. The difference between fractional ownership and syndication is that the latter invariably involves a fully furnished and serviced product in the buy-to-let market, says Rodger.

The Domain Equity Flexivest Fractional Syndicate offers two ownership options — rental and apartment — each modelled to suit different investment objectives.

The rental option, aimed at investors seeking a return, consists of 10 fractions for each apartment.

An annual rental and service agreement is entered into with newly formed estate agency Hunters, which assumes responsibility for managing and marketing the units.

The apartment option gives 12 fractional owners the benefit of one calendar month’s accommodation without the property remaining empty for long periods. Again, Hunters manages the apartments.

Hunters MD Nash Cohen says owning a second house is "the ultimate discretionary buy", but the South African experience reflects an exponential growth in property ownership as an alternative to the traditional pension.

The concept is distinctly different from timeshare, says Rodger, as the investor secures part ownership of a fixed asset via a shareholding in a proprietary limited company.

Tamboti Lofts in Ballito’s Simbithi eco-estate will be the first property in the scheme. Possibilities are also being investigated in Cape Town and Johannesburg.


Publisher: Business Day
Source: Business Day

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