The Positive Impact of Fractional Ownership On The Sharing Economy

May 27, 2024
Sharing economy circle of icons on blue background

Think Airbnb, Uber, and Bolt—all familiar names and perfect examples of prominent companies driving the sharing economy market. This market has grown exponentially over the last decade, fundamentally altering how we consume goods and services, particularly properties and cars. 

What is the Sharing Economy?

In simple terms, the sharing economy is a convenient arrangement that brings together asset owners and users. It typically operates through an online platform, facilitating access to goods and services through collaborative consumption. Instead of one person paying in full for something and having exclusive access, multiple people have access to a good and pay the appropriate shared cost price.

Accommodation

The collaborative part of this economy is critical to its success. Take a homeowner with a spare room or property, for example. Airbnb is a platform that can utilize this asset, making money for the homeowner and enabling them to rent their property to those seeking accommodation. 

Cars

Uber, Lyft, and, more recently, Bolt have made ride-hailing accessible with the tap of a button. Some consumers elect to use the service because it is cost-effective for their lifestyle or has a positive environmental effect, lowering road emissions and reducing congestion. For others who don’t want the hassle of car ownership and all the maintenance that comes with that, opting to use one of the readily available platforms in the shared mobility market makes sense.

Services

The sharing economy is so deeply intertwined with our daily routines that it offers a service for practically everything these days. You can sell or rent clothes through fashion platforms and book workspaces in most countries through co-working platforms, eliminating the need to fully own anything and all the costs associated with long-term ownership.

Long-Term Effects of the Sharing Economy

While the sharing economy offers many benefits, it is important to consider the long-term effects. To date, the sharing economy is undoubtedly just a two-pronged model in which you are either the owner of an asset you rent out for profit or the person renting the service. The divide is likely to widen as the sharing economy continues to grow.

For instance, will asset ownership ever be within reach for those struggling to get on the property ladder? This will be something that needs to be closely monitored the more the sharing economy continues to evolve to see the effects on the housing economy. 

So, unless you are the one providing the goods, you will ultimately continue to pay for an asset in which you have no ownership. For some, this is the ultimate goal: increasing flexibility and affordability due to the sharing of goods, resulting in lower costs for all users. There is a sustainability element, too, as the sharing economy fosters a circular economy, meaning that goods and services are continually reused rather than used once and disregarded, or in the case of vacation homes–left empty for a large part of the year.

Keyboard white keys with 3d graph and sharing economy highlighted

Vacation Home Co-ownership in the Sharing Economy

While the concept seems to be working well for services like taxis and bikes, ruling out the need to own a car, when it comes to property, the prohibitive cost of owning a vacation home outright or the increasing costs associated with renting a vacation home each year are some of the reasons why the popularity of co-owning a vacation home is rising.

With years of interest rate rises, owning a vacation home is becoming increasingly out of reach for some. If we step away from the rental of a particular service and move the spotlight onto co-ownership, we can see that fractional ownership of real estate has been rapidly gaining momentum over the last decade. 

More and more companies and start-ups are forming in Europe, Canada, and the US in particular. These companies all share the same idealogy: removing the barrier to entry by giving access to previously prohibitive high-cost real estate properties through co-ownership. By purchasing a fraction of the property, not only is the initial investment lower but so are the ongoing expenses, which are shared equally with all property co-owners. 

With the fractional model already seen in the day-to-day investment scene, where you can buy company shares and benefit from the upside, why does co-owning a property have to be any different? 

Removing the Barrier to Entry Through Co-ownership

Co-owned properties are typically owned by a company and split into an equal number of shares, where interested parties purchase a share of that company and, in turn, a percentage of the property, accessing the usage proportionate to the shares purchased. As in any property purchase, there is the opportunity to benefit from capital growth over time, again proportionate to the amount of shares owned in the asset. This model allows access to those seeking a property in the higher priced brackets for less capital investment. Co-owning property with others removes the barrier of affordability, preventing people from owning their dream vacation home and bearing the sole costs alone. 

If the sharing economy is making our lives easier with access to fully managed goods, why should owning a vacation home be any different? After all, some of the biggest gripes people have when their dream of owning an idyllic abode abroad turns into the reality and expense of getting it ready for every visit, along with losing a day closing it up and maintaining it for the rest of the time when they’re not there. This definitely takes the “fun” out of any property purchase.

With more and more companies entering the property co-ownership space, with no signs of slowing down, we are seeing that collaborative consumption in the luxury real estate market continues to offer a sensible solution for those seeking access to high-end assets without the initial high-capital investment and ongoing responsibilities which sole ownership brings. 

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Palazzo Maratea

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