Holiday Property Bond

BONDING NEAR THE ROYAL FAMILY:

[by David Hoppit a Cocoon Club Expert and Holiday, Poperty and wine correspondent for many national newspapers and magazines]

Getting one’s hands on holiday properties is an absolute doddle. Even as an impoverished writer, in the past quarter of a century I have bought no fewer than 1,300 of the things — and the number continues to grow. Most of them I have still to visit.

Here, perhaps, I should own to a modicum of journalistic licence. I do share my holiday homes with nearly 40,000 other people from all walks of life. Collectively we are described as ‘Bondholders’ or, more accurately, owners of a share in a ‘family’ known as the Holiday Property Bond.

One of our recent acquisitions is Henllys, a mansion on the beautiful island of Anglesey, not far from where a couple of royal newlyweds will soon be living. It is next to an 18-hole golf course at Beaumaris, an enchanting coastal town with a castle and harbour.

The 276-square mile island is a great place for holidays (bird watching is especially good); and, of course, it boasts the village with the longest name in Britain (and probably the world), much photographed at the railway station, which is now a museum. The name has 58 letters, but locals shorten it to Llanfair P.G.

With my fellow bondholders I have just spent £10 million restoring and converting Henllys into 25 apartments and adding another 68 cottages and flats within the 150-acre grounds. We are a democratic family, votes being taken every time new destinations are proposed.

In addition to the properties I (sorry, we) own, there are hundreds of others available through a tenancy scheme and every year a diverse range of themed holidays is available. I took my eldest grandson on an educational trip up the Nile where we were escorted to places where few are allowed.

The HPB, with its headquarters in Newmarket, is a bond issued by HPB Assurance Ltd, which is authorised by the Isle of Man Government Insurance and Pensions Authority. It is regulated by the Financial Services Authority.

It all started slowly in the early 1980s, with just 5,486 bondholders after the first five years. The ‘family’ expanded, without incurring debts, reaching nearly 19,000 after 10 years.

Over the years the group has built up a portfolio of properties currently valued in excess of £250 million. In our quest for perfection we have sold some of the earlier properties and reinvested in new ones. Currently there are 30 resorts available to our families, 15 of which are in the United Kingdom.

The properties include castles, French châteaux, whole villages in France and Tuscany, seaside villas, farm houses and even a former pub. The minimum investment of £4,000 will rise to £5,000 in January, for which the bondholder will receive 5,000 points, which can be used each year.

Families shackled to school holidays will probably have to spend more than that to be sure of a holiday each year, although points can be borrowed and saved for a period. A maintenance charge is made for each week, based on the size of the property. This covers care of pools, tennis courts and other facilities and clean linen, housework and so on.

The points bought, at £1 each, are inflation protected. Someone who spent £10,000 on 10,000 points in 2000 would now have an annual allocation of 14,237 points (which would cost a new investor £14,237).

There is an initial 25 percent charge on money invested, which is put into new property and securities, meaning that it would be several years before the value of the investment reached the original amount. However, the hypothetical “interest” on the money is the holidays every year. The value of the bond units is quoted in the FT every day.

Unlike time-share, where finding a buyer prepared to pay anywhere near a week’s original cost is well nigh impossible, after two years bondholders can sell their holding back at the current unit price. The HPB maintenance charges are less than those charged at most time-share resorts. They are a non-profit making element in the equation, based on the size of the accommodation and the facilities available.

With time-share the maintenance charge is paid whether or not the owner of the week goes on his holiday, but with HPB it is made only when a holiday is taken. For example, a one bedroom unit at Duloe Manor in Cornwall would cost £232 a week and one at Tigh Mor Trossachs would be £339. Larger units would cost more than £400. Four-day breaks are, of course, cheaper.

Overseas, the weekly service charges range between about £300 for smaller units and, for a four-bedroom home in Constant, the bond’s Dordogne village, about £509. There are also even larger units at some resorts, such as Biniorella, in Mallorca, where the charge can be as much as £740.

So, how many points are required for a holiday? At Duloe Manor, in Cornwall, a low-season week can cost as little as 1,550 points in a smaller unit, rising to over 15,000 points for a high season cottage or apartment with four bedrooms and three bathrooms. For a small charge pets are permitted at most developments.

Those who are able to take ‘spur of the moment’ holidays fare even better if they invest enough to qualify for what is called ‘the 28-day rule’ (currently just over £10,500). Obviously they have to take what’s available, but when doing so they use none of their points – so some people are away a lot of the time. The company’s travel club can usually arrange flights at the best rates.

The HPB, now 27 years old, evolved through the early 1980s as time share took off in Europe. The company has been at pains to distance itself from that part of the industry, not least because the concept is entirely different. Time share owners purchase a right to occupy a property at a given time, whereas we have an actual share in the properties.

Not that there is anything wrong with good time share. It was the outrageous selling tactics that earned it a bad name. As well as our HPB investment my family has spring and autumn weeks in Scotland, almost next door to Balmoral; and this disciplines us to take a holiday – not always easy for a home-worker.

Owning HPB points is also an incentive to take a holiday, because if they are not used for two years they are eventually forfeited. One thing we don’t like in our family is waste – so we are off to a little HPB village in southern Italy in a few weeks.

“Buona salute!”

More information: www.hpb.co.uk

How the points system works:

Bondholder A invested £5,000 so has 5,000 points every year: He is still employed as an accountant but his children have left home. This year he and his wife went to Buckland Court, in the Cotswolds in March and he had enough points left over to take her for another week at Physkos, in Turkey, in late October. In both cases he needed only a one-bedroom unit.

Bondholder B has about 11,000 points so he can benefit from the 28-day rule. He is a banker, also with no children at home so he took his wife to Lower Knapp Farm in Devon during March, using 4,850 of his points and then went to La Gomera in August, using up most of his remaining points. As a bonus he went on a spur of the moment break with his wife and grandson to Henllys for a week in late October, benefiting from the 28-day rule and thus using no points.