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Share your overseas property dream - 23 January 2007

With the amount of interest in the overseas property sector, it often seems as though everyone in the country is buying a little bolthole in the latest boom market. For those of you sitting out there, looking fearfully at the prospect of another mortgage if you want that apartment in the sun, there is another option.

Having somewhere to disappear to for a few weeks in the summer, and possibly in January (as the northerly wind rattles the BuyAssociation office windows), is now a realistic possibility for everyone, with the growth of fractional ownership. What critics are harshly calling ‘the new timeshare’ is really an efficient and protected way of getting the most out of a property for a certain type of buyer.

Under specific arrangements, worked out either among the interested parties, or often by a developer or agent, an agreement can be drawn up to allow a small number of investors to jointly buy a property abroad. Fractional ownership is often shared between four parties, each having specific times when they have exclusive use of the property. This can either be in order to use up the full year, or only in specific time periods to allow the property to be let out by a management agent and generate profit for the ownership collective.

If all of this does sound a little bit like a timeshare scheme, there are significant differences. Mostly, the fact that you have an asset to your name is a huge advantage, as becoming a property owner (even if it is shared) gives you significant legal rights. And don’t forget, there are thousands of people out there who still have and regularly use their timeshare property, and who have never had any problems.

The timeshare model was always a sound idea at the outset, it was just hijacked by unscrupulous elements who misled and effectively stole investors’ money. Such is the interest in timeshare, even in the current climate, that there is to be a conference for timeshare professionals in Dubai this March, the Vacation Ownership Investment Conference.

David Clifton, managing director of Interval International, is a keen supporter of the industry, “This is a sector that, once understood, brings enormous value to the table of everyone involved.”

An American concept, fractional ownership can provide the perfect solution for a significant minority of those interested in overseas property. Along with the lower entry level prices, and the fact that you won’t be tied in to a long-running mortgage on a second property, short usage periods can be ideal. Most people who are yet to retire have only a certain amount of time they can spend away from work, and so having sole ownership of a property abroad means leaving it empty or renting it out. While renting can be a success, it can be unpredictable, and if you are not using a management company, stressful.

Fractional ownership cuts down on the ‘downtime’ of your property, while still allowing you to have your own space to which to escape when you have the opportunity.

There are some disadvantages to consider. Mortgages are not available on portions of a freehold, so you have to have the funds available or release equity on another property. You may also find it difficult to release yourself from this kind of ownership. You are not tied in for any amount of time after completion, but you are only a part-owner of the property, and finding a buyer for that share of a house may not be easy. In any case, make sure that procedures for exiting the agreement are detailed and in place in the fractional agreement before you sign up.

Perhaps the biggest disadvantage is that a fractional share of an overseas property does not allow the spontaneous trips that many of us dream of when looking at foreign property.

Related Articles

• Guide to Buying Property Abroad – Getting Started
• Investment Guide
• Retirement Guide