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Businessmen chat during the Cityscape real estate exhibition in Dubai Oct. 2, 2012. Dubai’s real-estate market blew up spectacularly in 2008.


As Abu Dhabi and Dubai try to revive their property markets, competition is growing between the two emirates over attracting white-collar workers who can soak up the excess housing supply blighting both members of the United Arab Emirates.

In the last month, Abu Dhabi demanded that all government employees move to the capital from surrounding emirates. Dubai, meanwhile, is extending the length of residence visas that come with property purchases from six months to two years to lure overseas buyers seeking a financial or political haven in the emirate.

Recent moves by both emirates' local governments are expected to benefit their respective property markets as the capital, Abu Dhabi, seeks to end its real estate slump and Dubai aims to broaden the revival in some of its developments.

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Both cities took big bets on property that went wrong in the aftermath of the financial crisis. Dubai's market blew up spectacularly in 2008, while the capital's slid into the doldrums a couple of years later. So, luring tenants for empty apartments and offices is now crucial to boost the economies of the UAE's two most populous members.

When the property crisis hit Dubai, the cost of leasing plummeted. At that time, Abu Dhabi remained more expensive, but as rents continue to slip in the capital, cost is no longer the deciding factor.

"There's a huge commute from Dubai into Abu Dhabi, one of the reasons for that used to be the cost," says Terry Tommason, head of property and social infrastructure for EC Harris, the consultants. "But the facilities to live [in Abu Dhabi] as a family are coming online and the cost is becoming affordable."

While Abu Dhabi maintained that the decision was made to improve the lifestyle of its employees, the impact on the property market is tangible. An estimated 23,000 people will have to move to Abu Dhabi, according to government statistics.

The decree formalized a process started by individual government-linked institutions. Despite initial confusion over its scope, the office of government communication has confirmed that the decree goes beyond government departments to encompass any state-run entity, such the Abu Dhabi Investment Authority and Mubadala, the investment fund.

With oversupply an issue in both emirates, the shift of such a large number of residents should give Abu Dhabi an economic boost but will by default drain residents from other emirates.

Families are concerned about uprooting their children from Dubai's schools, while young singles are reluctant to give up their more lively nightlife options. However, all agree that the commute, an hour-and-a half motorway journey at breakneck speed, is not ideal.

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The decree is not the only measure being undertaken in the capital. The Abu Dhabi government has also initiated a review of a potential merger of Aldar Properties and Sorouh in an attempt to support the state-supported developers. Analysts have suggested that the authorities have held back towers from coming to market to calm the issue of oversupply.

In Dubai, the new regulations should allow owners of properties worth Dh1m or more to set up companies that would come with two-year renewable residence visas.

By linking the visa to domestically-controlled corporate regulations, rather than federal immigration authorities, Dubai can kick-start its own property market without relying on federal measures.

Unlike the previous visas, which were merely entry permits, these visas will allow homeowners full residence status.

Ludmila Yamalova, managing partner at law firm HPL Yamalova & Plewka JLT, says the move, while not yet codified in law, is positive news for investors, but "people are still grappling with how it will work."

While both governments try new ways to boost demand, Abu Dhabi has more catching up to do.

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Dubai's market is on the rebound, with analysts reporting price rises of as much as 20 per cent in some developments. The emirate's stability in the midst of the Arab revolts has translated into surging investment from Egypt and Syria, along with continued interest from Russia, India and Africa.

"Abu Dhabi is a couple of years behind Dubai in terms of the market cycle," says David Dudley, head of the Abu Dhabi office at Jones Lang LaSalle.

Revived buying interest reported by most agents remains confined to villas and apartments in the hottest destinations.

Construction workers earlier this month lined up in the harsh sun on behalf of property brokers keen to snap up the yet-to-be-built Emaar apartments near the Burj Khalifa, the world's tallest tower. The scenes, which brought back memories of Dubai's pre-crisis property frenzy, show how quickly Dubai's market is picking up.

But agents remain cautious about the future. Upcoming supply of around 24,000 units in the second half of this year make a boom scenario "unlikely," according to Cluttons, the property consultants.

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