Do you know the effects Brexit will have on a UAE resident?
Here is the article from yallacompare editor Tom Paye:
This morning, the British pound fell to its lowest level against the US dollar since 1985, as market fears grew of a ‘hard’ UK exit from the European Union (EU).
Without getting into the politics of it all, essentially, the British government has announced that the UK will trigger the two-year process of exiting the EU (Article 50) no later than March 2017.
However, markets are worried because the government appears to be pursuing an exit that will end freedom of movement between Britain and EU member states. In retaliation, the EU is expected to provide harsher terms on Britain’s exit (Brexit) from the union, with many worried that this will negatively impact the British economy.
In a nutshell, that’s why the pound has fallen to this 31-year low against the dollar. So what does this mean for you as a resident of the UAE?
Well, if you have no connection whatsoever with the UK, and aren’t planning to visit anytime soon, the news will be of little consequence to you.
However, if you’re planning on just visiting the UK, or even investing in the country, this could be good news for you. The UAE dirham is pegged to the value of the US dollar, so if one currency goes down against the dollar, it also goes down against the value of the dirham. In this case, the UK pound is worth less compared to a dollar, so if you’re exchanging, you’ll get more pounds for your dirhams.
To be precise, as of this morning, you’d get 21p for a dirham. That’s opposed to pre-Brexit exchange rates, which would normally net you around 19p for every dirham.
Now, that doesn’t sound like a lot, but it all adds up once you start exchanging larger amounts of money. Say you’re heading to London on holiday, and you want to bring along AED 5,000 of spending money. Previously, that would have gotten you around £900, but today, you’d get £1,065.75. In the UK, an extra £165 is not to be sniffed at – it could easily buy you a dinner for four, or pay for a family’s tickets to an attraction.
Indeed, if you’re out and about in London, and you’re using your UAE bank account, everything will cost you less.
But currency exchange is simple. What about when you’re making investments in the UK – perhaps buying property. This is where the real savings kick in. Say you’re buying a house that, in the UK, costs £200,000. Previously, that would have set you back around AED 1.1 million. Today, you could buy that house for AED 938,306. That’s an enormous saving – more than AED 150,000. Just for buying the house at the right time.
The flipside of that, of course, is that, if you’re buying a house in the UK to rent out to tenants, you’ll be paid in pounds, too. This means your monthly income from renting out the property will amount to fewer dirhams, so bear that in mind when planning out a big investment like buying property.
And to be clear, there are those who advise holding onto your dirhams. Some believe that the British pound will fall further still, making dirhams even more valuable against the pound.
That said, even if you decide to spend your dirhams on pounds now, you can rest assured that you’ll be saving much more than if you’d have done so six months ago.
Does this worry you or will you benefit from Brexit? Let us know below!