Abu Dhabi presses state employees to live there

ABU DHABI, Sept 13 Thu Sep 13, 2012 10:39am EDT

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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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