Fractional ownership – an alternative residential property investment vehicle

Publication Date03 September 2018
Pages513-522
DOIhttps://doi.org/10.1108/JPIF-02-2018-0013
AuthorBraam Lowies,Robert Brenton Whait,Christa Viljoen,Stanley McGreal
SubjectProperty management & built environment,Real estate & property,Property valuation & finance
Fractional ownership an
alternative residential property
investment vehicle
Braam Lowies, Robert Brenton Whait and Christa Viljoen
School of Commerce, University of South Australia, Adelaide, Australia, and
Stanley McGreal
Built Environment Research Institute, University of Ulster, Belfast, UK
Abstract
Purpose The purpose of this paper is to determine the profile of the typical online fractional residential
property investor in Australia. This study also seeks to understand the motives for engaging with and
investing in alternative residential property investments.
Design/methodology/approach This study employs a survey-based design via an online questionnaire
to gather information on investor age, gender, type, education levels, time horizons and investment history
and risk and return expectations. It also gathers information regarding investorsfinancial literacy including
tax implications of fractional property investment.
Findings The findings of this study suggest amongst others, that fractional property investors tend to be
younger, although the platform also attracts older investors including older females. The study also found
that investors do not select alternative investment platforms in anticipation of super-normal investment
returns. Return expectations are realistic and are based on a balance between capital growth and income.
Practical implications This study indicates that alternative investment platforms lowers the barriers of
entry intoresidential propertyfor first time investors.It therefore createsopportunities toallow many first time
individualinvestorsto invest in property,often as analternative to banksavings or investingin the stockmarket.
Originality/value This study enhances our understanding of the influence of alternative investment
platforms on investment decision-making. More specifically, it contrasts fractional property investment with
more traditional investment opportunities to understand the motives of investors for diversifying into online
investment vehicles.
Keywords Motivations, Online, Property, Residential, Investor, Fractional
Paper type Research paper
1. Introduction
Fractional ownership involving less than a 100 per cent interest in a property is a
long-established concept that has raised specific issues regarding valuation, perceived risk
and greater liquidity stemming from reduced levels of control and marketability relative to
full ownership rights. Various structures, vehicles, partnerships or other legal entities have
been used to manage fractional investment interests. Indeed, real estate investment trusts
(REITs) constitute a form of fractional investment. However, with new technologies
spurning the growth of digital platforms and the FinTech sector, a raft of alternative finance
investment products has emerged. Many of these, such as crowdfunding, have enabled
individuals for the first time to invest in property (Lowies et al., 2017). Indeed, ORoarty et al.
(2016, p. 2), reflecting upon the commercial real estate sector, observe that the industry has
not been immune to the transformative effects of technology, with disruptive forces leading
to a re-evaluation of how real estate is bought, sold, leased and priced.
Arguably one of the most comprehensive studies on alternative finance platforms is a
series of reports from the Cambridge Centre for Alternative Finance which examines, on a
regional basis, the application, update and impact of these platforms. The report for the
Asia-Pacific region (Zhang et al., 2016) identifies crowdfunding as the main opportunity for
real estate investment while digital-based platforms have opened-up the opportunity to
enter into fractional property ownership. However, to date, there has been an absence of any
Journal of Property Investment &
Finance
Vol. 36 No. 6, 2018
pp. 513-522
© Emerald PublishingLimited
1463-578X
DOI 10.1108/JPIF-02-2018-0013
Received 28 February 2018
Revised 7 May 2018
Accepted 10 May 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-578X.htm
513
Fractional
ownership

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