Overseas property clubs are the latest thing in holiday-home investment, offering members a choice of luxury addresses around the world and, sometimes, the promise of a tidy profit. Jessie Hewitson investigates
Why have one holiday home when you can have access to six luxury pads around the world, spending, for example, your summers in the South of France and your winters in Aspen?
This is the argument put forward by overseas property clubs, a new breed of holiday home investment. Membership allows you the use of several lavish villas around the world—though not before you sign a big cheque, of course.
It's a relatively new development in the UK holiday-home market: the first clubs opened in 2006. A cross between fractional ownership and luxury time-share, the concept originally came from the US. There are three main players: Rocksure, the Hideaways Club and the Oyster Circle, each with slightly different busines models.
Rocksure, the first to open for business, describes itself as a "property fund"—one that will sell all the properties after seven years, with the profits repatriated to the members, minus a 17.5 per cent charge deducted by the fund's managers. The company is now on to its second fund—its first one has 36 members, while the second is looking for 40. Full membership costs £189,000, plus an annual service charge of £1,800, which works out at £450 per week, if you're using the four-week quota, and covers cleaning, gardening, utility bills and a food-and-wine welcome pack on arrival.
Not all the money goes into the fund. Five per cent of the total (£1.5m) is held back to cover essential costs, such as stamp duty taxes, renovations, furnishings and contingencies. The charges for services, which include maid service, are kept down by letting the properties on the open market when investors do not want to use them. Members get to spend four weeks in any of the sumptuous properties in the six destinations Rocksure offers: Algarve, Marrakech, Brazil, Phuket, Colorado and Croatia. All properties will have at least four double bedrooms, with a good-sized swimming pool and terrace. Each one comes with its own housekeeper, and there'll be a cook on hand to rustle up a delicious dinner.
The Hideaways Club is a touch more expensive—at £220,000 for full membership, £115,000 for half membership and £150,000 for "lifestyle" membership. Full membership means roughly four weeks' use of the properties a year; lifestyle covers a similar amount of time, but for people who can travel out of season. Half membership gets you two weeks and is good for anyone who already owns a holiday home but is looking for a bit of vacational variety.
So far, the club has been running for a year and has 70 members, with a target of 100. At the moment, 13 of its 14 properties are in Europe. It has one in Morocco and intends to expand further afield, with recent acquisitions in Malaysia and Mauritius.
As with Rocksure, its properties are bought for around £1m. They all offer the same beds and furnishings as each other and come with at least four bedrooms. Some have gardens and tennis courts. Members are collected from the airport by a driver and have a housekeeper and concierge, who books the best tables at local restaurants and acts as a tour guide, if desired.
The annual charges are also higher, at £12,000 a year for a full member, a hefty £3,000 a week. There are no holiday lets to non-members. Membership has a minimum timespan of three years and the club will regularly be re-valued so exit prices can be set. The scheme hasn't been running long enough for anyone to sell, but Hideaways will get 20 per cent of the profit when they do. The member will also have to pay capital gains tax to the government.
The company was borne out of personal experience, says its CEO and founder Stephen Wise. "I sold my business, and my wife and I decided to buy a holiday home. Only we couldn't decide where, or whether we wanted a summer holiday home or a skiing one more. Trying to find a location that fitted all our needs wasn't easy."
Mike Balfour, founder of health club chain, Fitness First, is one of the principal investors. He points to the wisdom of spreading your investment. "Your money is not tied up in one country, or dependent on one property market alone. You're hedging your bets—so you can benefit from the good growth we're seeing in Morocco without losing out because of the low growth in Spain, for example. I own a holiday home in Spain—although I now wish I didn't—as well as my membership in Hideaways. I really wish this scheme had been around when I was looking for my holiday home, as it would have saved me a fortune."
Nick Van Gruisen, managing director of the Ultimate Travel Company, has a share in Rocksure. He bought it mainly as a property investment. "I think the locations that the properties are in have a very good chance of showing a healthy return seven years down the line," he says. "I also like having the opportunity to nip off to nice places without the hassle. Everything's there; you don't even have to think about it."
Oyster Circle is a different animal from the other two, principally because members don't own any equity in the properties—instead it's a "destination club". Money is made if membership costs increase and your share thereby gets more valuable and not through the capital growth of the property. At the moment, it costs £261,000 to join, which is fully refundable if you exit the club after four years. If you leave any earlier, you get back 80 per cent. There is also an annual fee of £16, 628 for 28 days and £19,951 for 35 days—a little over £4,000 a week. Launched in 2006, Oyster Circle has 100 members. So far, no member has sold their share.
The locations are overtly luxurious: St Tropez, Cannes, Lake Garda, Umbria, Chamonix, New York, Sotto Grande, The Abaco in the Bahamas, Portugal and South Africa. Properties all come with five-star hotel services, Jo Malone toiletries in the bathroom, a concierge and a personal assistant. Villas generally accommodate 10 to 12 people, but some are smaller, too. The elegant St Tropez villa, for example, has just three bedrooms.
"Our clients see this as good value," says CEO Paul Crowe, who cut his teeth running the luxury Irish golf development, the K Club. "The minimum spend on the properties is £2.7m, and three-bed villas with pools such as the one we own in St Tropez can rent out for £16,000 a week. We estimate that in four years' time our members will get close to £396,000. We don't promote our company as a property investment. Instead, we concentrate on very high levels of service—we're offering good value luxury holidays."
But what exactly is the growth potential of these types of schemes? All three are untested, in that members have yet to sell their shares. Hideaway's Stephen Wise suggests an "unofficial" figure of 15 per cent growth of the fund in the first year. Rocksure's founders resist being drawn on numbers.
Another potential concern is the potential exit strategy. Who do you sell your share to? And if you were trying to sell, would you be in competition with the overseas club itself?
Wise suggests that one solution to the problem would be a system where every third new member who joins buys out a member who is looking to sell. "This would be a lot easier than trying to sell your holiday home overseas," he says. David Rogers, founder of Rocksure, says that members who wish to sell before the seven years' life-span of the fund is up, would probably write to fellow members and give them "first refusal" on their share. If nobody wanted to buy, the share would then be sold on the open market. But this would presumably involve advertising costs.
Until members choose to sell, it's pretty difficult to predict just how successful and enduring these schemes will be. Charlie Ellingworth, director at upmarket buying agency Property Vision, is certainly sceptical about their ability to deliver an exit. "Marketing your share could be a major millstone with high costs and no market for it," he suggests. "A second-hand share could be difficult to sell on without all of the initial marketing benefits of the schemes. But my major problem is that you are bound to want to use it when everyone else does—like a skiing chalet from December to March, for example."
Andrew Langton, estate agent to the seriously wealthy in London and abroad, approves of the idea, but has some concerns about whether or not it will work. "I own a home abroad and I have to go every year without fail because it seems absolute madness if I don't," he says. "I'm beginning to think, after 15 years of going there, that it might be nice to go somewhere else.
"It all comes down to management, I think. The concept came from the US, where they are experts at ensuring quality of service in the luxury market. We're not quite so good at it, so that would be my main concern. There's no doubt people are interested in these clubs, but one has to wait to see if the idea has legs."
Home from home
• Access to a whole range of different addresses in a variety of countries
• Start your holiday as soon as you arrive: the homes are well maintained, with some providing a concierge service
• You can spread the risk of investment. Falling house prices in Europe won't necessarily be replicated in the Bahamas
• Luxury extras such as tennis courts, and chauffered cars are common, benefits you don't get when you manage the investment yourself
• How you exit the investment club isn't always clear
• Because the schemes are largely untested, it's difficult to estimate their value. Will there be enough demand to sell your share for a decent return?
• You own shares in a fund rather than the property itself. This reduces the risk, but also reduces the value of your potential reward