It was a natural progression, Townsend said, citing developers - such as Gamuda, Berjaya and Setia of Malaysia, and CapitaLand, Mapletree, VSIP and Ascendas of Singapore - which are all starting residential and commercial projects in Hanoi.

'Many groups, having once looked only at Ho Chi Minh, were now giving equal weight to Hanoi, which has the same level of affordability, the same level of urbanisation,' Townsend said.

Certainly, the city had its problems, such as congestion, pollution and poor infrastructure. But that was changing. Bridges and highways were being built, metro lines started. All the big banks were there, including several Chinese ones. Manufacturers from Japan, Korea, Taiwan and even the US and Europe, had began relocating their supply chains closer to the Chinese border.

At the time, Vietnam was still the investment story, Townsend said. When he presented at conferences, audiences could listen for hours. Today, he would be lucky to get five minutes. That's what an oversupply, 20 per cent inflation, and interest rates of about 20 per cent can do to a market.

So buyers relying on leverage turned away in droves. But for cashed-up buyers, CBRE still says that Vietnam, and particularly Hanoi, with all its recent investments, is worth a second look. 'Yields for residential property are still 7 to 8 per cent, which I think is still a good deal compared to other Asian cities,' said Townsend, citing a 1 to 2 per cent return for comparable properties in Hong Kong, 3 to 4 per cent in Singapore, and 5 to 6 per cent in Bangkok.

Furthermore, developers are doing deals. 'There is no Vietnamese word for distress, but we are very close to it now,' Townsend said. 'We're at the point where we've had an amazing run for three or four years, but as soon as private buyers stopped buying, developers got squeezed. Now many are on their knees trying to make payments to banks.'

Properties which launched at US$1,400 per square metre in 2007, and went as high as US$2,400 at the peak in 2008, are now back at their original price. Developers are routinely offering finance deals, furniture packages, and even rental guarantees.

'Yes you have inflation. Yes you have high interest rates. Yes you have foreign-exchange risk, and yes you have a socialist government,' said Townsend. 'But I've met a few investors last week, who have been waiting for eight years, and say now is the time to buy - that, for the first time, they are getting deals that are right.'

KP Singh, general director of DTZ Vietnam, agrees that Vietnam has seen challenging investment conditions this year, caused more by local issues than the global economic crisis. Hanoi has not been exempt, with investors choosing alternative investments, in particular gold and high-yielding bank deposits, he said.

However, Singh said that investors had by no means given up on property markets, with many looking at these issues as a short-term phenomenon, and instead focusing on the longer term potential of the Vietnamese property market.

'We have found that, in particular, cash-rich investors are actively exploring opportunities to accumulate land and property from those vendors who are finding themselves in 'fire sale' situations, and are therefore more open to selling property at lower pricing levels,' said Singh. 'We are also finding that financial constraints are leading to many opportunities for joint ventures to be formed, with landowners and developers more open to offers from reputable firms with available cash.'

Also active are developers looking to capitalise on Vietnam's tourism boom, which is bringing in large numbers of Chinese tourists.

'Hong Kong companies are definitely active hotel and resort buyers in the main two cities of Ho Chi Minh City and Hanoi,' said Mauro Gasparotti, senior manager at CBRE Vietnam.

'They typically consider mixed-use buildings with hotel, serviced apartment and retail components, and they are willing to pay a premium for prime locations.'