Buying Property in Abu Dhabi Six Months update

Finally something to see for our money!!!! Our apartment is located on the ninth floor.

Six months ago we posted an article citing top ten reasons to buy property in Abu Dhabi. We have decided to provide an update to let you all know how things are going. All the points we made then are still valid, but considering turbulent international financial markets, I felt a new post was required.

News Flash:

Well it's hardly news but the dollar has continued its steady trend downward against the euro. The UAE dirham is pegged to the dollar so any downturn in the dollar will affect the UAE/EUR rate. Since we began paying for our apartment in May 2006, the dirham has fallen by 33% against the euro. This means our property has cost us far less than we initially anticipated.

Obviously, were we to sell or rent out the apartment, the income or profit converted back to euro would suffer the adverse exchange rate. We are hoping to hold on to the apartment for a number of years and would expect either the dollar to begin some sort of a recovery, or failing this, the GCC ( Gulf Cooperation Council) or the UAE government may be forced to depeg from the dollar as inflation soars in the region.

Our experience so far has been in the most part positive. We purchased through First Gulf Bank and as such have some degree of additional security through the bank's reputation. However, problems still exist, and while we have received receipts and confirmation for all our payments and a purchase agreement, as yet no final contract is available. The reason we are being given is due to the new freehold law which has delayed the issue of contracts. While this would seem incredibly unusual in western property markets it's par for the course in the UAE. Again if it's high reward you are after (as we are) there will always be considerable risks associated.

The worst stories emerging from the Dubai market concern properties that have not been built, as rising construction costs make them unprofitable for the construction companies. In these situations investors were given back their money plus a modest return on investment (6%-8%), and while far from ideal this does give some degree of security on investment. The majority of people appear to have a positive experience of investing in Dubai and one would expect the same reaction from Abu Dhabi.

The demand for rental property in Abu Dhabi has increased at an alarming rate, so much so the government has had to introduce rental caps as the market struggles to cope with shortage of supply. Rental yield in 2007 exceeded 20% in some cases, and are expected to grow further in 2008.

Capital growth has steadily increased with a secondary market beginning to become more relevant.

For further information Arabian Business news has produced an excellent survey of property in the area.

March 2008

Evaluate your habitual spending patterns. A lot of our spending is a daily, often unnecessary habit and could be easily reduced.

If you buy a takeaway coffee everyday, why not invest in a coffee machine?Try taking your own lunch to work - if a shop bought lunch costs on average £7 (EUR10), by making lunch at home you could save around £25 (EUR35) a week!

This could buy you a nice meal out at the weekend or, if you're feeling really virtuous, you could have £1,250 (EUR1,750) in your savings by the end of the year.

Great Business Show

The link below is for the Sunday Business show which is on today fm every Sunday. The show comments on the latest news from the world of finance in an intelligient humourous manner. Dolmen stockbrokers also give some investment advice which is quite useful, although it must be remembered that their clients are some of Ireland's largest listed companies so their advice is not 100% impartial!

Enjoy the Sunday Business show.

Brits get hit on the Continent!

It wasn't until we reviewed our bank statement after a recent wedding in the UK that we realised just how weak the British Pound is against the Euro. Great for us living in Luxembourg with debts in the UK, but for any of the 5 million Britons planning to escape the never ending winter in Blighty they can expect a bit of a shock if they venture to Euroland this Easter.

One Euro will now cost 81p compared to just 70p this time last year. That means your holiday will be nearly 16% more expensive than in 2007, assuming Euro prices have stayed the same.

Don't be put off

To keep costs down, try and avoid paying any commission when buying your currency.

Lloyds TSB, the Post Office and Marks & Spencer are among the high street options that don't charge, but it's worth checking and comparing their exchange rates to make sure you get the best deal. You may find that the rates offered by 'Commission free' deals are so bad you might be better off paying the commission for a better rate!

Travelex promises to offer the best rate to those buying online or refund the difference, and there's no commission charged http://www.travelex.co.uk/uk/.

Consider buying online. Most online companies do not charge commission and will deliver to your home, your work, or you can collect your currency at the airport.

Buy high/Sell low

This is a catchy phrase that's useful when determining which of the prices quoted by an exchange dealer is the one you will get. The general rule is that you will get the worst option!

Take for instance the following rates that you might expect to be quoted when buying currency:

"We sell: GBPEUR 0.80"
"We buy: GBPEUR 0.75"

From your point of view however:

• If you are buying Euro you will have to buy at the highest price ie you'll pay 80p per Euro

• If you are selling Euro you will have to sell at the lowest price ie you'll get 75p per Euro

Thus, if you bought EUR 1,000 it would cost you GBP 800, and if you sold them straight back again you would only get GBP 750.

Commission

Commission may be charged in addition at a flat rate of a graded rate. This is worth considering, because if you are exchanging large sums of money a flat rate may be a better option.

Also, if you're travelling with a group, consider making one combined currency purchase to minimise the additional charges.

Come prepared

Don't leave buying your currency until you get to the airport, you won't get the best rate and you will pay commission. Not only that, but they may not have the amount (or even any) or the currency you want.

Mix and match

It's best to take a mixture of cash, debit and credit cards when going on holiday. Most cards add on 2.75% for use abroad and you may find yourself paying as much as £4.75 for every £100 withdrawn, so limit the number of times you take cash out and don't withdraw small amounts as flat rates may apply.

Cards are of course a smart option to limit the risk of losing cash - make sure you get travel insurance to soften the blow of this unpleasant situation.

Bon voyage

You just have to look at the headlines to know how fluid and unpredictable the exchange markets can be. There's nothing we can do about it, so I say pack your bags and get away from it all, just bear in mind the above tips to help keep costs down as much as possible.

Enjoy.........

Rules of work; How to get that pay rise

While not strictly a finance issue, many people often wonder why they are not getting their just rewards at work. The following points are taken from a book called ‘The Rules of Work’ by Richard Templar.

1. Walk the talk, get your work noticed.

2. Know that you're being judged at all times.

3. Set objectives.

4. If you can’t say anything nice, shut up.

5. Look after yourself, never lie, keep records.

6. Blend in, know the company culture.

7. Act one step ahead. Talk using the ‘we’ word and not the ‘I’ word.

8. Cultivate diplomacy.

9. Know the system and milk it.

10. Handle the opposition

February 2008

Check the interest rate you are paying on your mortgage. Be certain you are getting the lowest rate from your bank and if not shop around. Faced with increased competition many banks now have business continuity departments which aim to retain customers, often when faced with losing a customer they will offer a better rate. CHECK YOUR RATE!

Risk Averse?? Pigs or Parrots

Greetings Blogger,

At the moment we are just getting our house in order for a prosperous new year. This is the time of the year when accountants are faced with auditors with the inevitable increase in workload. This time every year I have a good think about my career and future and try and get things in perspective for the next 12 months.

Anyway enough serious talk today. I recently came across a great comment on an Irish website http://www.askaboutmoney.com/ which I highly recommend for impartial financial advice. While explaining about risk the poster had this to say about investment:

In 12 months time imagine your portfolio down 40K. Sick as a parrot I would say - out of 10 how many parrots?
On the other hand, and no more likely, you may be up 40K - Happy as a pig... Out of 10 how many pigs?
If more parrots than pigs then you are short term risk averse and better off investing your money in a high interest deposit account- these days the depositor is king - appreciate your power!!
If no parrots or pigs then you genuinely have a long term view - go for your choice of mixed investments.

Not only is this very funny but really highlights the point that investment decisions are not merely determined by current or even future market conditions but rather a whole range of issues.