British Pound crushed again: 5 ways UAE residents can benefit from Brexit

Last Friday, more than 17.4 million Brits voted for their country to exit the EU while 16.1m voted for it to stay rooted in the camp.

This unexpected difference of 1.27m votes sent the world markets into a tailspin, with investors shunning riskier assets and scurrying to the safety of asset classes such as gold and the US dollar.

It would have been a completely different story if more than a half of those voters (634,751 to be precise) had voted for the UK to stay.

But that wasn’t to be.

This decisive – if marginal – difference resulted in the British pound receiving a battering not seen since September 1992, when speculators including George Soros broke the Bank of England by forcing it to withdraw from the European Exchange Rate Mechanism.

Soros, who had been heavily shorting the British pound at the time, famously pocketed $1 billion on the deal and came to be known as the world’s premier currency speculator.

The UK’s decision last week to leave the European Union or ‘Brexit’ offers UAE residents a once-in-a-lifetime chance to benefit from Britain’s controversial choice. Here’s how:

#1 Cheaper holidays to England

On June 23, before ‘Brexit’, the British Pound was trading at Dh5.5 vs £1. This morning, it is at Dh4.89 vs £1, resulting in a clear savings of 11 per cent off your vacation expenses to England. It’s summertime, and school holidays kick in from tomorrow – what better time to enjoy the weak pound?

Analysts expect the pound to remain weak for a while. “It might look very attractive to buy a major currency which has fallen by more than 11 per cent in two trading days and currently standing at lowest levels in more than three decades. However, it might not be the sterling case,” argues Hussein Sayed, Chief Market Strategist at FXTM, a brokerage services firm.

#2 London property becomes cheaper for UAE residents

It’s more than the exchange rate at play here. Yes, property values have become 11 per cent cheaper for UAE residents almost overnight, but there are bigger gains to be made here. Falling consumer confidence combined with a weakening currency are proving to be a perfect combination for the UAE’s property-savvy investors.

According to Faisal Durrani, head of research at Cluttons,: “Any US dollar or UAE dirham investors will find the price of an average prime Central London residential asset $96,000 (Dh350,000) less than it was on June 20. Conversely, of course, London residential property is now $96,000 cheaper for international buyers looking to enter the market.”

According to property consultants Knight Frank, “in the short-term, consumer confidence is likely to be knocked by the continued uncertainty.” This “combination of falling sentiment and those investors who are over extended having to sell will result in some disposals which will be likely to weigh on asset prices,” it maintains. “This we see coinciding with a devaluation of the pound. The combination of lower prices, plus exchange rate effect should then draw in overseas investors [read: UAE residents] looking to acquire assets in the UK, attracted by a G7 country with a track record of achieving strong economic growth.”

#3 Take stock

Literally. Global equity markets have lost more than $3 trillion in two trading days, exceeding losses of the 2008 financial crisis. Some of the global and local blue-chips are now available at bargain prices, and this may be the time for long-term investors to enter the market. Even as the fundamentals of the Dubai and Abu Dhabi market remain robust, investors are advised to look at their individual circumstances and consult a financial advisor before making any investment decision.

#4 Remit more… pay off a mortgage

For British expats in the UAE, this may be the perfect opportunity to remit in bulk and write off a mortgage or another financial outstanding back home. In fact, the pound is not the only one suffering from the ‘Brexit’ malaise – emerging market currencies including the Indian rupee and Philippine peso have lost a bit of their values too (although not even close to what the pound has lost).

In addition, interest rates for the dollar-pegged UAE dirham are now expected to remain lower for longer, with the US Federal Reserve expected to tread with extra caution when it comes to raising interest rates anytime soon. Depending on your individual circumstances, it may make sense to take out a loan here in the UAE (priced in UAE dirhams) to pay one off back home.

#5 Do buy Dubai

Online shoppers from the UAE are finding goods priced in pounds a lot cheaper today than they were a few days ago, thanks to the post-Brexit pounding of the British Pound. And not just online, local outlets of British retailers like Marks & Spencer, Harvey Nichols, Boots and many more may soon start offering discounts (if they haven’t already) on goods to clear inventory so as to make space for fresh goods at the revised prices. Rolls-Royce at a discount, anyone?

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