Posted by: englishdubai | December 14, 2008

A Silver Lining

The world is in recession. I picked up a newspaper yesterday – Bank of America laying off 35,000 people, Woolworths on the brink of receivership and 30,000  Woolworths staff will find themselves without a job by Christmas. Were just two of numerous economic bad news stories.

The previous recession proof UAE is now feeling the squeeze. A few weeks ago the mighty Nakheel let go 500 people, friends of mine who work in real estate can no longer get a car loan or mortgage.

On a personal note – the real estate slide has happened in Dubai. That bubble has finally burst. While I don’t think I have suffered a 50% property value as some people have reported it is certainly significant and with the mortgage companies increasing interest rates by 2% (as the rest of the world decreases theirs) – the squeeze has come.

Aside from the interest increase (which is painful) – the house price adjustment is a good thing. The monthly increases were frankly unfeasible and unrealistic. Also one does not lose on property unless one sells and the good news for me is that there is no need for me to sell just yet.

The positive side to the all economic drama in the UK means a great upside for expats in Dubai right now. Two and half years ago the exchange rate when I came to Dubai was 6.4 AED to £1 – shortly after I arrived the US dollar weakened and for the last two years it has been about 7.4AED to £1, Each time I went home it was expensive. Really expensive. However over the last few weeks there has been a dramatic change. As the US dollar strengthened so did the dirham. As I write this the exchange rate is currently 5.4AED to £1 a change of over 27% in a few short months.

The whole upshot of this is that for Brits in Dubai who are sending money back to the UK are getting some serious value for money right now. This week in the UK I couldn’t help but translate back into Dirham’s the whole time. As an example a pint of beer for 10AED (25AED in Dubai), Sing Star on PS3 97 AED (159AED in Dubai) and best of all a 30″ Flat Panel 5500AED (an amazing 12,000 AED in Dubai). With the recent reduction in VAT to 15% and credit crunch busting offers to be had the UK is a Dubai residents shopping paradise at the moment. Be certain I have taken full advantage over the last week or so.

Seems odd that tax free Dubai is not perhaps the shopping haven it used to me. Personally I am glad not to be earning sterling and holidaying in the Euro Zone as tourist exchange rates give £1 for 1 euro – now that is something I had never considered. I have read forecasts that the £ will fall further against the $ in the coming months. If it does it will take my mind of the escalating cost of living in Dubai.


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