Today, investing in a second home has evolved far beyond simply purchasing a property from a real estate agent in a country you have fallen in love with and hoping all goes well. With rising prices and economic shifts, today’s property buyer has more choices than ever—more alternatives that offer a more sustainable way to invest and a more socially responsible way to own a second home.
According to the UK Government English Housing Survey 2021-2022, a comprehensive study that provides insights into the housing market in the UK, 2.1 million households in the UK reported having at least one, second property, with 40% (327,000) being outside the UK.
While second home ownership continues to be a popular want amongst most nationalities, the reality can often look very different. We look at four issues the world faces due to overtourism, rising property prices, and large numbers of vacant second homes. We look at the effect this is having on the local community and examine why co-ownership of a vacation home is not just a viable solution but a crucial one to negate the impact of these problems, align with ESG goals, and bring socially responsible property investment to those seeking to own a slice of their dream vacation home.
1. Overtourism
Let’s go back to 2020, which proved a pivotal year in more ways than one. In the hospitality and private letting space, the doors literally closed overnight, with almost half of the world’s population locked down by April of that year. The businesses that made it through this unprecedented era were the ones to look at their business model and have the agility to pivot to the current wants and desires of today’s travelers, many of whom were literally stuck for a lengthy period of time.
With only the internet as our outside world, the rise of online content exploded through social media channels. Previously, unexplored places became familiar with a new captive audience. Getting lost in the online world, a welcome distraction from what was taking place around us, meant that all those wishlists that had been put on hold when we were too “life busy” became ( with a few hours of immersive screen time) very much “now lists.”
With many a name for the period of time, after the world opened up once again, we heard “revenge tourism” and “bucket-list travel” bandied about endorsing elevated-price travel, along with a steady stream of excited property speculators buying up investment properties in areas experiencing unprecedented volumes of visitors, which to this day appears to show little sign of slowing down.
Co-Ownership of Vacation Homes: A Sustainable Tourism Solution?
While there are many solutions that need to be put in place to combat the worldwide effects of overtourism, those seeking to own vacation property can make a significant positive environmental impact by choosing to co-own a vacation home rather than a whole property in its entirety.
Firstly, the effect of visitor distribution is substantial. Co-ownership vacation homes can be sold in anything from ¼ to 1/12th fractions, meaning that one house could have up to 12 owners. This translates to up to 11 fewer individual property sales in one location, and with a robust usage calendar that sees owners staying in their vacation homes all year round, fewer short-term visitors that only travel in peak time.
Another significant factor that you will notice with many fractional ownership properties is the sense of community they bring. As these are long-term lifestyle properties, they tend to be off the main tourist trails and hotspots that contribute significantly to the overtourism problems faced by specific locations. Co-owners view these properties and locations as their second home. A locality that they can explore and become a part of over the years.
The fractional ownership real estate model brings property purchasers to regions of sought-after destinations that are slightly further away from mega hotspots, which not only benefits the countries and local communities but also allows visitors to immerse themselves in authentic local life and not seasonal destinations explicitly grown to cater to tourists. Co-owner stays tend to be longer, so they are happy to explore by car, local transport, or walking, which is often the opposite of short-stay tourists who want everything on their doorstep for the short time they visit.
2. Rising Property Prices
In 2007, the concept of Airbnb was born. Starting out as a simple way to make money by renting out an air bed in their San Francisco flat, the founders discovered a way to bring guests into a local community and experience a unique stay. The company has grown to over 5 million hosts in almost every country. However, what started as a plan to integrate tourists with locals may have inadvertently become a victim of their own success.
Whether you get your daily dose of news via tabloid papers, online, or via social media, you’ll be hard-pressed to miss the rumblings of discontent amongst local communities across Europe and the UK regarding the flood of homes turned into vacation properties for the short-let market, overburdening the real estate market in major destinations. While there are separate contributory factors here to discuss, there is a link between the current issues and the social impact and ESG (Economic, Social, and Governance) factors.
Short Lets
What all these factors have in common is that we are seeing the result of overtourism and a surge in the cost of second homes, where every savvy property investor has an eye on the potential yield. Prices increase, visitor numbers increase, and short-let rates escalate, putting a lot of money in the property owner’s pockets.
In the last few years, we have witnessed the fallout from this unprecedented growth. Now, major European cities are protesting. Locals who don’t own their homes fear that their rent will further increase or, worse still, that they’ll be out on the street with their landlord seeking the lucrative profits that short lets of local property are bringing. The direct competition between the local community and an influx of high visitor numbers drive up prices, mounting pressure on the local infrastructure and resources.
Popular destinations attract property investors, and the continued purchase of multiple properties raises demand and property prices. Factor in supply and demand and other government or tax incentives, and often, the end result is local inhabitants being priced out of the market.
How Co-Ownership of Second Homes Balances the Real Estate Market
A property bought for investment can often be a speculative purchase, often purchased with the intention of sitting on it and waiting for the price to increase further before selling again.
By co-owning a vacation home—this socially responsible way to own a second home—means that multiple co-owners all own ONE property for the long term. Twelve people buying a fraction of a property will mean eleven fewer individual buyers purchasing real estate. With this model being applied just a few times, you can start to see the potential decrease in property sales that this brings to an area experiencing soaring property prices and an increased burden on its infrastructure.
The ESG factor lies in potentially reducing the second home’s environmental footprint. With the renovation of dilapidated properties in the area, which the developers will restore rather than build from new, not only will the local architectural heritage be preserved, but more importantly, less land will be developed.
3. Vacant Second Homes
Another hot topic right now is second homes—predominantly located in popular vacation locations—which remain empty for a large percentage of the year. This scenario isn’t good for the property, the local community, or businesses. Studies have shown that the average vacation home is used for just 30 – 44 days a year, meaning that they sit empty for over ¾ of the year. Often, these empty periods fall within the off-peak times of the year outside school breaks and key holiday dates. If the property has been snapped up for purely investment purposes, once again it may remain empty until sold on again. Vacant properties have a detrimental effect on both the local community and its economy.
Responsible Consumption Through Second Home Co-ownership
Co-owning a vacation home is a prime example of conscious and responsible consumption. A buyer who wants to have a vacation home overseas but is fully aware that they won’t have the time to use it more than, say, 3-4 weeks a year opts for co-owning his dream second home with others, buying only what they need. One property is then used year-round by its co-owners, minimizing the environmental impact of second homes through their utilization.
4. Impact on the Local Community
Let’s look at the impact of vacation home ownership on the local community. Take the example of a family traveling to an idyllic location one year, falling in love with the area, and deciding that they would love to spend their free time there each year, so go ahead and purchase a property from a local real estate agent.
Each year, as the children grow and other commitments take over, the family realizes that their dream of months away over the year now looks like the odd week here and there. As we discussed above, the reality is that the property now remains vacant much of the year, obviously detrimental to the family’s finances and the local community.
Empty vacation homes don’t contribute to the local economy. This won’t be the only property in this area that has been purchased this way, and now, with the off-season approaching and the local businesses only being serviced by the full-time residents of the local population (which has now decreased due to the purchase of second homes in the area), there will be a decline in revenue all round.
The Positive Impact of Co-owned Second Homes on Communities
One of the main benefits when buying a share of a co-owned vacation home is the fact that it is fully managed and looked after in their absence. With a group of like-minded co-owners, the property will be used throughout the year, benefitting the local economy as the co-owners care about their vacation home and the community that it is in. After all, they’ll be visiting each year for the years to come, so the positive impact of fostering stronger ties with the local communities and respect for the local culture will be a priority for those visiting their home away from home.
Longer visits mean a deeper engagement with the local community and local businesses, who in turn, benefit from regular income all year round and not just in peak season. Socially responsible second home ownership in the form of co-owning a property for vacations fosters a sense of shared responsibility. Each property is fully managed all year round, which means local employment and ongoing demand for local products and resources, generating income for the local businesses.
Conclusion
Fractional real estate ownership offers a more sustainable approach to second home ownership. It’s exciting to see more and more companies entering the market with beautifully restored or refurbished properties in areas where the local community is as important as the destination. Through the restoration of existing buildings of architectural importance and renovation of existing properties, the environmental strain of excess new builds decreases, which, in turn, helps to bring balance to the local real estate market and quells the local residents’ fear of being pushed out.
Year-round occupancy in co-owned vacation homes helps support the local population and their businesses. It avoids the see-saw of income generated in seasonal high-tourist destinations and further strengthens community ties through the co-ownership model, which champions socially responsible second home ownership.
