I attended the property wealth seminar last week in Cape Town. It was fantastic to see the optimism and forward thinking in the room, not only from the experienced panel but also from the 100+ delegates attending. What a place to host the event....right next to the majestic Cape Town stadium – where the worlds media are all setting up to turn the cameras on and open up the world to what we have to offer here in South Africa. I think allot of people are going to be pleasantly surprised by what they see both on and off the field . I must say I really am getting excited now....just under 20 days to go.
Back to the event last week ....
The stats and forecasts that emerged from various experts in residential, investment, commercial and leisure real estate sectors where encouraging, and further confirmed my views that Fractional leisure real estate is set to boom going forward. Here are few of my motivations for this view.
Over 50% of bond applications are being rejected by South African banks.
This indicates that people still aspire to acquire homes and second homes. If these people can’t get the holiday home on whole ownership basis they are motivated to consider shared ownership in one of its various forms (such as Fractional Ownership). Even the recession didn’t seem to stop us aspiring to acquire better lifestyle for ourselves and our families!
We are changing the way we view leisure asset ownership.
I believe there has been a ‘mind shift’ in the way we view our leisure asset ownership (especially the non-essentials, like holiday homes and luxury cars & boats). We are re-evaluating what these assets mean to us, what they are costing us when we are not ‘using’ them, and how we can get the maximum value out of these assets. Fractional ownership of these luxury assets allows us to still enjoy the fruits of our labours – however only own/pay for what we intend to use. Similar to how 'pay as you go' opened up a new market in the mobile telecoms industry.
Post 2010 - Many hospitality based real estate owners will be looking for ways to unlock value from their B&B’s hotels, resorts and guest houses.
Leisure sectional title hotel ownership, private residence clubs and fractional ownership are all vehicles for these owners to attract a broader base of owners and increase room occupancy levels – which in turn drive on-site revenues of spa’s and restaurants etc... in turn consumers will become more attracted to serviced and hassle free leisure real estate, especially the products that provide added value perks such as rental options, local and global exchange options, and personal concierge style services.
The FNB House price index reports a cumulative growth of 194% since July 2000.
This demonstrates that over the medium to long term property is still a good place to invest. Over 5, 10 , 15 and 20 years ‘general’ property growth outperformed all other equity markets in South Africa. Now I am of the view that Fractional ownership is a medium to long term indirect capital investment into professionally managed luxury real estate. Yes - you pay a premium for the privilege of owning a share and not the whole property, and yes there are levies and management fees associated with shared ownership involved. Nevertheless fractional property ownership could just be the vehicle for us to enjoy a lifestyle investment that is underpinned by real estate values.