Will Luxury Fractionals Be First to Rebound from Credit Crunch?

Two prominent voices in the resort development world feel private residence clubs -- the luxury arm of the fractional resort market -- may be among the first to rebound from the credit crunch. Dick Ragatz (pictured) says buying $3 million whole ownership houses on the beach or in a ski resort with the expectation of 20% annual appreciation are gone, but the alternative, residence clubs, typically a shared ownership by six to ten households in each residence, with club staff to care for the property and provides hotel-like services, still make sense.

While Ragatz Associates, points out that fractional sales will undoubtedly be off for 2008, "in the long term, recent events will enhance" their attractiveness" when compared to whole ownership.

Steve Dering of DCP International agrees. His Chicago-based firm helps market residence clubs, and while sales have slowed, he believes “affluent households will always want a vacation home.”

With residence clubs "the use is the same as whole ownership but the purchase price is far lower. Additionally, the shared annual ownership cost is significantly less than the cost of renting a comparable luxury home multiple times a year. When you factor in the abundant amenities and a private staff that takes care everything, it’s more for less without the headaches. The game changer for us," concludes Dering, "is that our buyers do not have to sell other real estate to purchase at a residence club,” Dering said. “And many do not have to finance, although financing is still available.”