Thursday, February 21, 2013

Vientiane Real Estate Boom or Bubble?

Recent economic and business reports have confirmed what many already know about Vientiane and its real estate sector, that it is in the midst of a boom and some would say a real estate bubble has formed.  The bubble is in part because of incredible price increases and the fact that the supposed boom is almost entirely unique to Vientiane alone. 

Vientiane Times newspaper and Rentsbuy.com reported last week that Vientiane experienced a 10-15% price increase from last year alone.  It’s understandably so.  Vientiane is one of the primary hotbeds of economic activity in the country.  It’s often seen as the city to be in for work, school, business and so on.  Having said that, the city brings in a lot of people.

The real estate boom has been going on for at least 10 years but definitely more intensely in recent memory.  And it can be observed for several reasons, including:
  • Burgeoning Lao middle class with more money to spend.
  • Lao ex-pats sending money back to relatives in Laos to buy land or property.
  • Foreigners working and living in Laos renting or buying large expensive homes.
  • Real estate development by foreign and Lao companies to sell/rent/lease finished properties.
  • Real estate prospecting – buying property or land only to hold it in the hopes of price increases.
Side Note:  If it is in fact just a bubble, the risk implication therefore is that with increased saturation of properties for sale and hyper inflated prices making homes, land and property out of reach for most Lao, the demand would eventually come down and so would the prices.  However that is not expected for at least several years.

4 comments:

  1. house in THAILAND much cheaper in Laos

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    Replies
    1. You're probably correct. In some markets this is likely the case. It's ironic because Laos is still considered a poorer and developing country.

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  2. Adding a few facts:
    - Land in VTE is more expensive in BKK or many big cities in the world, considering a lack of infrastructure that goes with high prices.
    - It is cheaper to rent, as revenue on property investment is very low if not negative. The owner counts high capital gain to make up for low return.
    - If you have not inherited some property or rich enough, average real estate will never be able to afford to buy a property.
    - Despite Lao law, a lot of real estates are owned by foreigners speculating.
    - Solution is for the Lao government to release some land at realistic price to set new benchmark, and to control the bubble

    ReplyDelete