What is the reason for the exorbitant land prices in KTM valley and other urban centres of Nepal?
The “bubble” has not popped, despite the economic slowdown caused by COVID and the current economic slowdown due to inflation. The bubble has not even shown indication of shrinking, albeit it may be slowing down in growth.
What do you lot think? Will the bubble crash? What is keeping the prices high? Is demand so great that per anna, land prices in KTM are 20 and 30L range? Is this a spending spree caused by the boost in income through remittance? Are land buyers and homebuyers over-leveraged? Will we see a mortgage crisis where everyday folks fail to pay their interest payments?
Are there places where land prices have fallen, like in the hilly hinterlands where people are escaping?
I conjecture that the price is justified simply by supply and demand. There is limited supply of land and demand is high, especially with most families having someone abroad sending money back. This leads me to believe that land prices will not change unless there are other assets, like businesses that are investable. It seems to me that land is the only asset class that has exposure to the global market, in that there will always be demand for it as long as the dollars from the global market keep flowing.
We have no reason to believe that dollars will not flow and thus the prices brought on by this sort of speculation will remain. As for other asset classes, most Nepali businesses do not export and thus do not bring dollars in. It seems to be, from some cursory thinking, that land prices are so high solely because of this fact. I.E, when one speculates on the future value of land, one takes this fact into account and feels justified in purchasing land at exorbitantly high prices.
Perhaps, there is a correlation in remittance dollars coming in and land prices. I would wager this correlation is pretty strong–if anyone knows where I can get historical data on KTM land prices, let me know.
I also conjecture that we’re over the growth in land prices that is exponential for the growth in the number of migrants laborer has also slowed. We could easily verify or nullify this conjecture with proper data.
Please give your thoughts on this matter, especially if you disagree. I’d like to hear alternative explanations and perhaps predictions.