Abu Dhabi presses state employees to live there

Stanley Carvalho and Raissa Kasolowsky
Sheikh Zayed Mosque in Abu Dhabi

ABU DHABI, Sept 13 (Reuters) - Abu Dhabi is pressing its

public sector employees who reside outside the emirate to

relocate within its borders, a policy which analysts say aims to

address heavy oversupply in its real estate market.

"Employees residing outside the emirate will not be eligible

for the housing allowance" provided to workers in state

institutions, the government said in a circular dated Sept. 12

and seen by Reuters.

The policy takes aim at people, believed to number many

thousands, who commute to work in oil-rich Abu Dhabi while

living in the neighbouring emirate of Dubai because of lower

rents there or a lifestyle which they see as more comfortable.

The new rule, which will take effect after a year, will

apply to citizens of the United Arab Emirates as well as

foreigners who are working in Abu Dhabi for the government and

all its wholly owned entities and companies, the circular said.

It said employees should live in Abu Dhabi "to avoid traffic

and road accidents", an apparent reference to the risks of

commuting on the 130 kilometre (80 mile) highway through the

desert between Abu Dhabi and Dubai, which is packed with cars at

rush hour.

However, analysts said the policy appeared designed to help

absorb a large supply of new high-end homes that is set to enter

the market in Abu Dhabi this year. Property prices in the

emirate have tumbled about 50 percent since the global financial

crisis hit the market several years ago, analysts estimate, and

the new supply threatens to undermine them further.

"Many new units have come up in Abu Dhabi, reaching the peak

of its development cycle. The move is to create new demand and

make sure the vacancy rates don't reach high levels," said

Matthew Green, research head at consultants C.B. Richard Ellis.

David Dudley, director of operations for the Middle East and

North Africa at Jones Lang LaSalle, said: "This is a positive

move for Abu Dhabi's property market that will help create

demand for housing where there's oversupply."

Analysts were unable to provide a precise number for Abu

Dhabi government employees living outside the emirate, but two

years ago, the number was roughly 20,000, one analyst estimated.

Government officials in Abu Dhabi were not immediately

available to comment on the policy. The government is a major

employer in Abu Dhabi and several state-owned companies, such as

Etihad Airways, already had such a policy in place or were

considering whether to adopt it.

Earlier this year the Abu Dhabi government said it was

considering a proposal for a state-backed merger of the

emirate's biggest two property developers, Aldar Properties

and Sorouh Real Estate, after they were hit

hard by falling property prices.

Abu Dhabi, the capital of the UAE, had a population of

nearly 2 million in 2010, according to the Abu Dhabi Statistics

Centre; most residents were workers from other countries.

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