I would suggest talking to your neighbor and explaining the situation. If they haven’t yet built very much they will probably be totally fine with moving to somewhere else. Most of the players I have met in this game are rather friendly and understanding, and most likely they had no idea they were encroaching on your build.
Just remember in situations like this the tone you use is very important. There is a big difference in how it will be received between politely explaining the situation and asking them to move and saying something along the lines of “omg wtf leave”.