Fractional ownership and co-ownership: a part of cultures for centuries
With home sale prices skyrocketing and budgets stretching thinner, we’re hearing more about real estate’s newest homeownership category: cobuying and co-ownership.
Given rising home prices, many would-be homebuyers are getting creative to make their homeownership dreams come true. And cobuying is a viable option for many.
While many of us think co-ownership is a relatively new concept, you may be surprised to know it has been around for centuries. The practice of group ownership and building financial independence through community has been widely accepted and practiced in many cultures and societies.
Today, we’re going to explore two cultures – Hawaiian and Chinese – who have leaned on the concept of sharing for decades.
Community is ingrained in Hawaiian culture
Communal ideas, which have been developed for centuries, are deeply embedded in the life of Hawaiians. Take the land as an example. The idea of “land huis” took hold in the latter half of the 19th century.
In the years following the Great Mahele, one of Hawaii’s most defining moments in history, native Hawaiians often banded together to form large huis, or groups, to purchase tracts of land communally. Forming huis, often on government land, was a common practice, especially on Maui and Kauai.
Some land huis owned thousands of acres – up to 2,500 acres or more – with 100-200 original members. One person took the initiative and, after negotiating with the owner of the land desired, collected the purchase price for all who wished to enter the enterprise. A single deed was then given to the group as tenants in common. An association was formed, and a committee was selected to prepare articles of association and by-laws. Each member then signed it in agreement.
Communal landholding was more agreeable and more familiar to Hawaiians than private ownership. Land huis were an example of agency and resourcefulness, enabling Hawaiian families to retain lands and a sense of community.
It’s a family affair in China
Millennial homeownership is a struggle—except in China. While homeownership remains elusive for most millennials globally, a study by HSBC found 70% of Chinese millennials owned a home compared with 40% of millennials worldwide.
How is this possible, in the land with seven of the world’s top 10 most expensive cities for residential properties?
Because housing prices have soared in the past decade or two, most millennials have turned to personal lending networks to buy a home. They often seek financial support from the bank of mom and dad, grandparents, or even friends.
Many elderly Chinese move in with their children in their twilight years. Thus, many see buying a property in their son or daughter’s name as an investment in the family’s future. Chinese strongly believe in generational investments, and property is a lasting and safe investment to pass down for generations to come.
Plus, government policies have created a pattern of intrafamilial lending. As the government has adopted more restrictive limits to loans and how much money you can borrow from banks to buy properties, people borrow money heavily from family members to make down payments.
Conclusion
Cobuying and co-ownership is a rapidly growing phenomenon in the United States, especially as home prices swell. While it may seem like it’s a new concept, we can all agree it’s certainly not a fad. Having been around for centuries, perhaps our ancestors were onto something.
Nestment, Inc. does not guarantee and is in no way responsible for the accuracy of information provided in this blog post. All information is provided “AS IS” and with all faults. Data presented here may not reflect all real estate activity in the market. While the information on this site is about legal and tax issues, it is not intended as legal or tax advice or as a substitute for the particularized advice of your own attorney and tax professional.
