Abu Dhabi has ordered government employees to reside in the capital as it tries to address oversupply in the housing market.

Analysts said the recent circular by Abu Dhabi Executive Council instructing public sector employees who reside outside the emirateto relocate within its borders aims to address heavy oversupply in its real estate market.

The new rule, which will take effect after a year, will apply to UAE nationals as well as foreigners who are working in Abu Dhabi for the government and all its wholly-owned entities and companies, the circular said.

“Employees residing outside the emirate will not be eligible for the housing allowance” provided to workers in state institutions, the government said in the circular.

According to analysts’ estimates, property prices in the emirate have tumbled about 50% since the global financial crisis hit the market several years ago, and the new supply threatens to undermine them further.

Matthew Green, research head at consultants CBRE said, “The move is to create new demand and make sure the vacancy rates don’t reach high levels.”

Meanwhile, the director of operations for the Middle East and North Africa at Jones Lang LaSalle, David Dudley said, “This is a positive move for Abu Dhabi’s property market that will help create demand for housing where there’s oversupply.”

The government is a major employer in Abu Dhabi and several state-owned companies, such as Etihad Airways, already have such a policy in place or are considering whether to adopt it.