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Holiday home at fraction the cost

JACKIE Parker, Seeff Properties‘ Seaview area specialist, lives in her dream home at the ocean‘s edge.

“I feel as if I am on permanent holiday. If I can help others acquire this heaven to enjoy on their holidays, something special will be added to their lives. And with fractional ownership, buyers don‘t have to be wealthy to afford a holiday home,” she says.

One of her key projects is the fractional share ownership project at The Kromme in St Francis Bay.

Here, buyers can purchase a share in a fully furnished exclusive townhouse on the canals in St Francis Bay for R260 000.

Jackie says fractional ownership allows ordinary people access to a lifestyle property that would usually be beyond their means. She describes lifestyle properties as golf estates, marina properties, properties in sought- after resorts such as St Francis Bay and game lodges.

Most of these properties cost in excess of R2-million and a single owner normally leaves them standing empty for most of the year, even though they are liable for all the rates and taxes and maintenance costs.

With fractional ownership, buyers purchase a share of a property and usually use it for four weeks a year, spread through the different seasons. Properties are usually divided into 13 fractions. Fraction owners also share all the cost of maintaining the property, the rates and taxes and all running costs.

“These properties are usually managed through a property management company. They make sure the property is ready for you when you arrive – cleaned and fully equipped, and the unit gets cleaned when you leave. If you want it serviced daily, you can also make that arrangement,” Jackie says.

There are two types of fractional ownership – either true fractional title in which you own a title deed for a 13th share of the property, or shareblock ownership where a company owns the property.

Fractional owners then own blocks of shares in the company,

“This type of ownership differs from timeshare in that with both shareblock and fractional title ownership, the purchaser receives the benefit of capital growth in the value of their share of the property, and it is not just a purchase of vacation time.

Their shares or fraction may be sold for the market value at the time of sale.”

However, fractional ownership is not right for everyone, says Keimpe Weistra, of Pam Golding Properties in Jeffreys Bay.

“Many of the fractional ownership products on the market can leave investors feeling disappointed,” he says.

“It should be remembered that with a fractional ownership product you can only use the unit or facility during certain weeks in the year (like timeshare) and this is not very flexible if one takes into account that most people can only go away during school holidays.

“I would rather buy a sectional title unit and rent it out. With this kind 0f investment I can use it when I want to.”

However, Keimpe says there are some attractive fractional ownership investments for specialist investors: “Those where you buy a fraction of a unit as well as the package that comes with it”.

For example access to facilities like golf courses, and where the units are part of a rental pool. There are tax considerations to be aware of too. Corporate lawyer Warren Parker, of Joubert Galpin Searle, explains that this depends on whether you make the purchase as a natural person, a trust, close corporation or company.

Also, purchases and sales of holiday homes above a certain threshold attract transfer duty, Warren says. If you sell your holiday home, you are taxed according to the intention with which the property was bought and sold. If you buy the property with the intention of residing there, or renting it out, you have a capital intention, whereas if you buy and sell the property to make a profit you have a revenue intention.

“A holiday home is normally considered a place acquired with the intention of living in it, so the proceeds realised from the sale would generally be of a capital nature and subject to Capital Gains Tax (CGT).”

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