18th January 2023
Fractional ownership of real estate is a way for multiple buyers to share the cost, risk and capital gains of property ownership, while receiving their fair share of usage rights over the property.
Importantly, it’s not the same as a typical timeshare arrangement:
During recent years, fractional real estate investment has become much more common throughout Europe, as well as in both North and South America.
Fractional ownership in London is also rapidly increasing, especially among individuals who want a prime piece of real estate but only need access for a relatively small percentage of the time.
Investopedia defines fractional ownership as ‘a percentage ownership in an asset’, in which individual shareholders ‘share the benefits of the asset such as usage rights, income sharing, priority access, and reduced rates’.
Some timeshare contracts confer fractional ownership upon the purchaser, but in most cases a timeshare operates more like a rental. Conversely, in fractional ownership real estate investment, the buyer takes ownership of a share of the property either directly or through a parent company.
This partial ownership of houses is a way to buy property in prime locations like central London, without paying 100% of the market value. It’s therefore particularly valuable in cases where the house would otherwise be left empty for much of the time.
Crucially, fractional ownership shareholders receive all of the benefits of their stake in the property, such as the ability to sell at any time, and to receive their share of any capital gains when they do so.
Fractional ownership gives people a way to invest in prime London real estate at (in the most literal sense) a ‘fraction’ of the price.
Specialist property management companies acquire the real estate upfront before selling the fractional stakes to investors, who receive a specified number of nights in the property for each share they buy.
New startups are transforming the UK market, equipping new-build homes with cutting-edge technology, including digital keys that can unlock the front door remotely via an app, and online booking systems for owners to schedule their visits.
Several groups of people can benefit from the advantages of fractional property ownership in London. For example:
Camilla Dell, managing partner of Black Brick, says:
‘Fractional ownership offers the unique opportunity to be based in London for part of the year [making it] a desirable option for those who visit London for business, visiting family, or for leisure.
‘We expect this opportunity will also appeal to businesses who wish to have access to properties for staff from overseas who may base themselves in London on a temporary basis. By owning a fraction of the property, the investor pays a fraction of the price but will still gain from long-term capital value.’
Black Brick is working with international start-up Flyway to bring fractional ownership to London. Black Brick is sourcing more than a dozen prime properties in London, which Flyway will fit out to a high standard and sell on a fractional basis.
We have already sourced and secured a number of exciting luxury properties, for example:
A one-bedroom Mayfair pied-a-terre with convenient access to Oxford Street, Regent Street, Bond Street and Piccadilly Circus, as well as the green space of Hanover Square. Refurbished by renowned New York designer Karim Rashid, the property features Eight Sleep cooling mattress technology, Philips Hue wireless lighting and SONOS speakers. Fractional ownership is available from £289,000 for 30 days per year.
A one-bedroom Liverpool Street apartment in new development One Crown Place. Stunning 16th-storey views give a stunning outlook across the city’s skyline. Designers Bowler James Brindley and Studio Ashby worked with architects KPF to create ‘quiet luxury’ in prime central London. Black Brick was able to negotiate favourable purchase terms and helped to manage and oversee the legal process.
Flyway CEO Nikos Drandakis says ‘democratising second home ownership’ is more important than ever in a climate of consistently rising prime property prices.
‘Empty second homes are a huge waste of resources’ he says. ‘Fully managed co-ownership doesn’t only boost the purchasing power of buyers, it also helps maximise utilisation of resources, being a much more sustainable way to own a second home.’
Black Brick is excited to be involved in advancing this ‘smart new way to own a second home’ in London.
Numerous similar companies are believed to be investigating the London fractional ownership market, ahead of a potential expansion into the UK from Europe and/or America.
Camilla Dell said: ‘These companies are here, and they are very active. They seem to be springing up everywhere. It will be interesting to see if it succeeds in attracting buyers who feel this format will make second home ownership affordable, or who don’t want the hassle of managing and maintaining a second home in London.’
For more insight into London’s unique investment opportunities, or to discuss your own property plans, please contact Black Brick today.
We would be delighted to hear from you to discuss your own property requirements. For a non-obligatory consultation, please contact us.