Kakawax

There's much hopeful expectation that rents in Dubai might drop due to the economic downturn, which would be great for expats of course... though I feel it's a little optimistic, given that not all property value is defined by rental income. However, should rents drop would the financial gain be lost due to a depreciation of the AED? Not one to shake the tree, but my salary will be in AED so I'm wondering how solid the currency is for the foreseeable future.

Mogs

It is as solid as USD and always will be

Kakawax

Your belief that it's as solid as the USD isn't at all reassuring. I'll bear it in mind though.

It would be interesting to hear the opinion from anyone that speculates or trades who would have a better understanding of how the currency is backed, it's overall Debt/GDP ratio, foreign investment and what the market trend is to get a better understanding of its stability.

Mogs

AED is pegged to the USD - so until such time as the UAE government decide to depeg their currency - it is factually as stable as USD.

Millhouse

i'm starting to worry about you crack-a-wax

... tank with respect which currency? With the exception of the US, nearly all major currencies are looking a bit dicey.

It's a dollar peg. The question is - will the peg break? One day, yes. Tomorrow, no. Who knows when? well, it will be a largely political decision.

There isn't that much speculation on the peg breaking. Not like KSA. And even if they did break the peg... it would be a few % movement (KSA forward rates are only 1 or 2% off the spot). It won't be a 25% Turkish style devaluation in six months.

Millhouse

it is here! remember you don't own the land, and the land is useless anyway.

it's only worth something as someone is prepared to rent it.

Kakawax

Woooah.! de-ja-vuh.!! the voices in my head said that just yesterday

Ok I appreciate the info. As you say all currencies are feeling the slowdown.
I'm not sure that being pegged to the worlds greatest debtor is something to feel relaxed about, but good to know that if the peg was removed that the AED has enough subsidiary value that it won't 'tank'.

I was thinking more along the lines that

a) the debt owed on a buy to rent property by the landlord requires that the rent stays high enough to service the debt, even if that lower limit is artificial

b)that sections of the housing market are bought by conglomerates as investment who are able to write off a certain amount of shortfall

c) many properties are bought by foreign investors to benefit from the tax free status of being registered in the UAE

Ok so I'm not an 'on the ground' expert, and I've only been able to get a perspective on the possible effect of a downturn in the region by piecing together online sources, but I get the feeling that an 'across the board' rent devaluation is based more on optimism than the financial reality.

I'm quite happy to be corrected on my assumptions... the biggest concern for myself, and no doubt anyone else considering the move has to be rent.

Millhouse

Sadly, I think your assessment of the housing market is very wrong.

In 2003 oil prices were 20-30 USD a barrel. Rents for a villa would be around 50k/year
In 2008 oil prices were 100 USD a barrel. Rents for a villa would be around 300k/year
Today - we are starting to see oil at 30 a barrel. Rents for a villa are around 200k/year

I'm not saying they are linked. But it does look that way. someone will be along shortly to correct me and say that the market in 2003 had no foreign investment. They are, of course, correct. The UAE was also a different county in 2003.

If you are worried about being paid in the world's reserve currency, then I don't know how you sleep at night being paid in GBP.

As we have all said. Don't buy here in the short term.

Kakawax

Well I'm not buying anything and what you say here
suggests rent will see a dramatic reduction... though I might have misread you, or visa versa.

If you can sleep at night knowing your worth is dependent on the Dollar then you must be narcoleptic.!!
Bu of course once I move to Dubai my worth will be too... do they sell Xanax otc.!!?

scrubbedexpat141

Just don't bother mate.

Kakawax

moving... or sleeping..?

scrubbedexpat141

Moving. Why worry about the currency? If you're transferring it back to GBP (like I am) then at the moment, the fact the pound is doing its best to become worthless is actually good news.

I want to spend pounds in the future on bricks and mortar. So if I get more pounds for the same amount of dizzers - it's a good thing.

Kakawax

Paid AED into Dubai account... no need to send large amounts back to the UK that's why I was asking about AED's prospects.

scrubbedexpat141

So you won't save money elsewhere or anything?

If you're paid in AED, in a Dubai account and don't want to send any away then surely what happens to the Dirham is also irrelevant?

Paid in Dirhams
Spend in Dirhams

It's been said but it is pegged to the dollar so don't worry too much.

Kakawax

As for savings/investments in lieu of pension that is still for me to consider, but its good to know that the currency is stable. Cheers.