Business Monitor International's Vietnam Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Vietnam's Real Estate industry.

Beset by high interest rates, rising inflation, oversupply, and government efforts to curb lending, Vietnam's property market is suffering through the aftermath of a boom gone bust.

One of the biggest threats facing the sector is a slowdown in lending. Real estate credit has sharply declined since November 2010, when the State Bank of Vietnam (SBV) began its monetary tightening cycle. In addition to curbing lending through monetary tightening, the government has listed some real estate in the category of assets with the highest risk for commercial banks, making it more difficult for state banks to extend loans to new projects, and exacerbating an already tight credit market.

To source financing independently of banks, developers are now seeking partners as joint venture partners or for the sale of projects in their totality to a third party, retail and office space or of residential units. The current shortage of bank finance presents significant advantages for cashed-up property investors.

The Vietnamese economy is one of the fastest-growing in South East Asia but, in recent years, it has been characterized by overheating tendencies, such as high inflation and a large trade deficit. Inflation is the highest in the Asia Pacific in 2011. The government is responding to these problems and is also looking to contain any effects of a less conducive global environment, with the economic turmoil in the US and the euro zone.

It appears that foreign investors are looking past many of the short-term challenges to take advantage of the long-term opportunities. Interest and investment in Vietnamese property is rising, according to CBRE and Vietnam Net. Investors from Asia and further afield have shown particular interest, while many domestic investors are looking to partner with those from overseas to make a deal. In H111 Hanoi's property market had high levels of investment and especially FDI. The level of FDI going into in Hanoi projects in H111 was a sixfold increase on H110, according to CBRE.

There is a trend for more mergers and acquisitions (M&A). Investors and developers from Vietnam are becoming more active as buyers, where previously foreign groups with large capital availability were the main players. M&As are still hampered by the country's underdeveloped legal framework, complex regulatory procedures and a generally low real estate transparency.

The Da Nang commercial property market is set for growth, due to its growing importance as a tourist and commercial centre, its central location, low real estate prices and social stability. In 2012, rental increases there are expected to exceed those of HCMC and Hanoi across the board.