By Asa Fitch and Rory Jones
Thousands of people are on the move in the United Arab Emirates as a deadline approaches for employees of the Abu Dhabi government to live in the city or risk losing a portion of their salaries.
The move-or-lose requirement was announced in an unusual edict last year that said government workers would have to give up housing allowances built into their salaries if they lived outside Abu Dhabi starting next month.
The measure appeared to be aimed at expatriate workers who have settled in neighboring Dubai because of its cheaper rents, opting to commute nearly 100 miles instead of paying up, while also being attracted to the city’s livelier culture. But it was also seen as a heavy-handed example of how Abu Dhabi is trying to compete with Dubai, legislating demand in its stagnant real estate market instead of letting market forces run their course.
The dictum has already resulted in marginally higher demand for rental properties, moving services and school places in Abu Dhabi, analysts and people involved in those industries say. The precise impact is hard to quantify, but 5,000 to 10,000 people could be affected, according to some analysts, helping buoy residential rates in Abu Dhabi’s oversupplied property market. While rents went down in Abu Dhabi in the wake of the financial crisis, they fell even further in some parts of Dubai, which had prompted many people to live there.
“We have definitely seen people moving to Abu Dhabi as a result of this regulation,” said Craig Plumb, head of research at Jones Lang LaSalle in Dubai. “It’s hard to tell the impact on the market, but the Abu Dhabi market seems to be recovering because for the first time in a while we are seeing rental rates increase.”
The average annual rental rate for a two-bedroom apartment in Abu Dhabi was 130,000 U.A.E. dirhams – about $35,000 – in the second quarter of the year, up from AED120,000 in the fourth quarter of 2012, according to JLL. Until then, rates had consistently fallen quarter-on-quarter since reaching a high of some AED230,000 in the fourth quarter of 2008, as the global financial crisis impacted the market and thousands of new units became available.
Many movers in Dubai also say they’re seeing an uptick in relocations to Abu Dhabi, although it’s hard to put a firm figure on the trend. Mohammed Shabir, the manager at Royal Movers in Dubai, said while he would normally handle about one family relocation to Abu Dhabi a month, he is now handling about six of them. “Mostly people are moving because of these new rules,” he said.
For schools, the regulation has been a double-edged sword. Demand for places in Abu Dhabi has increased, but some students in their final few years have either had to find another school – a difficult prospect – or make the long daily commute.
“If you have a son or daughter in the middle of A levels or the IB diploma, the chances of them picking up matching courses halfway through is almost nil,” said Clive Pierrepont, director of communications for schools operator Taaleem. “Some parents and students are faced with having to consider the prospect of the commute from Abu Dhabi to their Dubai school to complete their last year. It’s incredibly disruptive and stressful for all concerned.”- Middle East Real Time WSJ
