By Monique Vanek Posted: Mon, 06 Mar 2006 09:00 | © Moneyweb Holdings Limited, 1997-2006

“Fractional ownership” is fast becoming a preferred method of tenure. The super-rich are using it to buy private jets, designer bags, sports cars and vacation homes, also called private residence clubs. Even less-well-off people are using it.

NetJets first pioneered the concept of fractional ownership for business-class jets in the late 1980s. In high-end resort real estate markets, fractional ownership is growing at over 150% per year and is only in its infancy as a trend, reports property group Pam Golding’s website.

Fractional ownership, which became part of South African lingo last year, gives individuals part ownership in luxury goods and services formerly available only to those paying full price. It allows a group of relatives or friends to pool their resources to get a taste of the high life through so-called private residence clubs.

Legally, fractional ownership is no different to other forms of share ownership, such as block ownership or timeshares it can be rented out, shared with family and friends, sold or left to someone in a will.

According to Frans van Hoogstraten, a Werksmans’ director, fractional ownership is a generic term for numerous old concepts by which use or ownership can be shared, such as block ownership, and property syndication schemes. It is just a new term developed by the marketing community. “It describes existing methods of ownership which allow you to own or have the right to use a property jointly with others,” says van Hoogstraten.

“But whereas traditional timeshares [or other forms of shared ownership] peddled tiny stakes in lower-end properties, residence-club members own much bigger chunks (up to a quarter) of swanky, multimillion dollar homes in ritzy locales,” says The Economist’s Intelligent Life.

Also, says Mike Spencer, a professional associated valuer at Platinum Global, with timeshares you only pay for the ability to use the time but don’t own the property, whilst fractional ownership is usually divided into fourths, eighths, or thirteenths, with each owner having an equal number of days a year to use the unit. The owner can also sell that share, which is usually bought from a management company, which handles maintenance and schedules everyone's time, says bankrate.com. Other differences between timeshares and fractional ownership are their prices, financing and fees. While timeshares can be acquired for a few thousand rands, fractional ownerships can run into a R100 000 or more, says bankrate.com.

According to Ezinearticles.com unlike timeshares, fractionals tend to appreciate because more of the buyer's rands go to high quality finishes and "bricks and mortar" vs. sales commissions which can be as high as 40-50% with timeshares.

In South Africa, companies like Pam Golding properties (PGP) and Domain Equity offer it. Pam Golding started offering it in the last quarter of 2005, says CEO Andrew Golding. The realtor offers fractional ownership at Shamwari Game Lodge, Pezula Hotel and the Island Club Hotel in Cape Town . In the UK it offers fractional ownership for Edwardian-style town house, 47 Park Street, which was built in 1926. Fractional ownership in any one of these properties will set you back R400 000 and R550 000 for the annual usage, which is on average 28 days.

Luxury Yacht Fractional Ownership is also prevalent with The Moorings and Voyage Yacht Fractions.

Domain Equity offers fractional ownership for its Tamboti Lofts in Ballito’s Simbithi eco-estate. The glamorous Emperor Hotel in Sandton, the Kruger Park Lodge, Ocean Reef on the KwaZulu-Natal north coast also offer it, says Spencer. According to Golding individuals are using fractionals as an investment, for leisure, or an alternative to second homes. Such ownership, says Golding is logical as you own only the time you will spend at your vacation residence combined with the added benefit of services and amenities that would generally not be available with ownership of a private home.