Vietnam was the only Asean country to increase quarter-on-quarter growth rate last year, up 5.9 per cent for the whole year. It recorded the third quickest post-economic tsunami recovery after China and India, beating other Southeast Asian neighbours.

Even though Foreign Direct Investment (FDI) into Vietnam dropped last year, compared with 2008, it was still the second highest year on record at US$21.48 billion. Investors are returning and, this year, FDI is tipped to reach US$22 billion to US$25 billion. Gold prices are consolidating, and the stock market is expecting more foreign funds to flow in this year.

Townsend adds that confidence in the Vietnamese currency, the dong, is improving. 'There is still devaluation pressure in the short term, but stability should return on export strength and reduction of the government stimulus.'

Major infrastructure projects are continuing to ease congestion in Hanoi and open up links to provinces over the next five to 10 years.

He also points out that, since last year, a change in government policy has made it easier for foreigners to buy residential property on a leasehold basis.

So why will they choose Hanoi? Townsend believes a number of factors augur well for the capital this year - among them, a growing population, improving infrastructure, and the benefit of being the seat of government for Vietnam. Many foreign companies - CB Richard Ellis among them - are planning to relocate their headquarters there, he says. Townsend notes that Hanoi emerged relatively unscathed from the economic downturn. Rents for retail space remain strong, while office rents and capital values have fallen far less than in Ho Chi Minh City. 'Strong demand from Vietnamese businesses helped initially. Now, many more foreign companies are taking notice and it's no longer just a destination for [non-governmental offices] and diplomatic missions.'

For the first time, investors have a real choice, he says. For decades, the Hanoi property sector was dominated by state-owned companies that typically developed 'vanilla-flavoured' buildings. More recently, foreign developers have begun making their mark with more interesting projects. Oversupply in Ho Chi Min City is also causing investors to look elsewhere, while Hanoi, in contrast, is under supplied.

Townsend says the high-end residential market is far larger than one would expect for a country with per capita GDP hovering about US$1,000.

About 80 per cent of foreign-investor property market capital is being directed to Hanoi, Townsend says, in particular from Malaysian and Singaporean investors.

Hong Kong company Tung Shing has also weighed into Hanoi with a US$80 million residential real estate development called Golden Westlake Executive Residences.

Gamuda of Malaysia is developing a residential land area for more than US$500 million along with a US$250 million water treatment plant. Late last year, Berjaya (Malaysia) launched the first phase of Thach Ban Garden City, a 31-hectare new urban area on the fringe of the city. Other Malaysian groups are actively seeking out sights.

Dozens of Korean projects are under way, including a 70-storey commercial tower connected to twin 46-storey residential towers under construction by Keangnam of Korea.

Inpyung has just broken ground on a US$660 million residential complex, with more than 4,500 condominium units. Other major Korean groups developing projects include Hyundai, Posco E&C and Lotte.

Townsend concedes that congestion, pollution and poor public transport are still barriers for foreign investors in the real estate market to put their money into infrastructure development. But he notes that Vietnam is climbing its way up the value chain and Hanoi, the key growth engine, will soon expand its role in the region, acting as a manufacturing centre for China and the rest or East Asia.

Matthew Powell, Hanoi branch director of Savills Vietnam, the marketing agent for Indochina Plaza Hanoi (IPH), agrees that Hanoi holds promise for real estate investment as Vietnam's economy recovers and 'the government, experts and many people have begun thinking of a better 2010'.

Savills research indicates that the first quarter of this year will see a clearer market trend towards more affordable and lower grade apartments. 'Demand for housing is expected to remain high in the medium term,' Powell says.

The more affordable grade B and C apartments are likely to account for more sales by volume, though Powell says that upmarket villas remain the dream of many.

IPH, a high-end development under construction in the district of Cau Giay in Hanoi's west, reflects the trend of affluent Hanoi residents to take up residence in the city's emerging new urban centre. According to Peter Ryder, chief executive of Indochina Capital, the parent company of Indochina Land, IPH will not only become an icon for Hanoi residents, but will also serve as a symbol of Vietnam's new forward role on the world stage.

'When we created Indochina Capital in 1999, it was always our intention to build a landmark of international calibre in Hanoi.

'IPH is the realisation of this ambition, symbolising the growth, vibrancy and increasing sophistication of the city of Hanoi and the country of Vietnam,' he says.

Designed by Gravity Partnership (Hong Kong) and PTW (Vietnam), the development comprises 18,000 square metres of grade A office space, 30,000 square metres of premium retail shopping and more than 340 luxury apartments.

The complex offers residents clubhouse facilities, rooftop pools and terraces, a children's play area and tropical sky-gardens.

IPH has imposed stringent architectural guidelines to ensure that all those who live, work and play there are assured an enjoyable lifestyle and a sense of a natural and welcoming community, Powell says.