(November 23, 2010) — According to US fractional consultant Richard Ragatz, who has released a half-year report about the fractional and PRC market in the US, Canada, Mexico and Caribbean, sales are down in both volume and average price when compared with the same period the previous year. But there are also signs that conditions are improving for the Fractional industry.
Total sales volume in this segment of the resort real estate industry during the first six months of 2010 was about US$175.1 million. This figure comprises 854 shares or fractions, which were sold at an average price of around $205,000 (down from $222,000 in 2009).
At the mid-point of June 2010 there were 105 PRC/Fractional resort real estate projects in active sales in North America, down from 125 on December 31, 2009. Pointing out the obvious, the report says, “This means 20 projects ceased selling during the first six months of 2010. None of these 20 projects stopped due to attaining sell-out, i.e., they stopped due to poor market conditions and/or lack of marketing monies”.
Ragatz divides the fractional real estate market into two segments: The higher priced projects, at over $1,000 per square foot, are PRCs (Private Residence Clubs). Projects falling below that price threshold are referenced as Fractional Interests (FI).
Of the 105 projects, 66 were Fractional projects and 39 were PRCs. At the end of 2009, these numbers were 82 and 43, respectively, which means that of the 20 projects that ceased activity, 16 were Fractional and only four were PRCs.
Geographically 57.1 per cent of the 105 projects are in the U.S., 21 per cent in Canada, 12.4 per cent in the Caribbean, and 9.5 per cent in Mexico.
Ragatz reported that 57% of projects offered no buyer financing, only 14% of projects offered local bank financing and just 29% of projects offered developer financing.
The report concludes: “Despite the preceding fairly negative findings about the performance of the shared-ownership resort real estate industry during the first six months of 2010, it appears that the bottom may have been reached and that demand is beginning to pick up – at least at the high-end PRC level.”
Projects which achieved the most encouraging performance included those at the higher-price PRC level; those in Colorado and the Caribbean; those selling smaller shares; those integrated with a branded hotel; and those in prime destination resort communities such as Aspen, Vail, New York City, Maui and Los Cabos.
Ragatz noted that the better sales performance at the high-end sector of the overall shared ownership market is a consistent finding throughout the survey.
Copyright JAM Publishing/InsideTheGate.com