Laos is one of the smallest nations in the ASEAN region, with a population of less than 10 million. Since it is located near economically advanced countries of China, Vietnam and Thailand, Laos has often been overlooked. The country’s energy sector, however, received huge investments in recent years thanks to its natural hydropower resources. This has brought along a lot of positive changes in the country as more outside investments are coming in, improving the standard of living.
Property Prices Remain Low
In Laos, property prices and cost of living remain low. In the 2016 data provided by Savills, most investors can secure apartments in Vientiane range from only US$1,000 to US$4,000 per square metre, which is significantly lower than prices in Yangon, Hanoi, and Ho Chi Minh. Apartments in city centres have prices amounting to US$4,000 per square metre, whilst those outside the city centre can cost only US$690 per square metre. Vientiane properties in the city centre have a gross rental yield of 14.58%.
Foreigners cannot own land in Laos but most of the property investors hail from Thailand, Vietnam, and China – Laos’ neighbouring countries. Only about 40% of the property investments in Laos come from locals.
Surge in Infrastructure in Laos Attracts Foreign Investments
To date, Vientiane’s infrastructures are booming, fuelled by 30 years of constant economic growth and surge in overseas investments. A lot of these constructions take place in economic zones the government introduced in 2003 to draw local and foreign investments. For example, the That Luang Marsch Special Economic Zone, which cost US$200million since its construction in 2012, has 18 condominium towers. The Thakhek Specific Economic Zone will have additional 45-story condominium buildings as part of the Thakhek Dream World City Project. This development now has 22 local and foreign companies who signed investment agreements amounting to US$12.9 billion with a registered capital of more than US$4.03 billion.
With this surge in property development, demand for property in Laos will continue to rise in the coming years amidst the continued influx of foreign direct investments and robust economic growth of the country. Additionally, the completion of the Laos-China railway, which now brings more jobs to the locals, will boost the Laos property market and the country’s economy. The high-speed railway will link Vientiane to Yunnan province in China.
According to the Asian Development Bank Outlook (ADO) 2019, Lao PDR’s GDP growth will stay at 6.5% until 2020. Industrial growth will appreciate by 8.1% this year from 2018’s 8.0%. This is secondary to the increase in electricity generation and sustained infrastructure development.
Foreign Property Investment in Laos
Whilst foreigners cannot own land in Laos, they can lease it. The country allows land lease for up to 50 years. Depending on state approval, a lease extension is possible. The land lease can be up to 75 years in designated economic zones. Foreigners can also to build homes or any structures on the leased land. With state approval, the leased land can also be sub-leased. Under the Investment Law, foreigners with at least US$500,000 investment in the country can have land-use rights. They can use this for office, residential or other business purposes.