In 2007, Vietnam became a member of the World Trade Organization, a milestone that greatly accelerated international trade. Cheap labor ignited the Vietnamese manufacturing trade, and today labels bearing the words “Made in Vietnam” are common in many countries, including China. This booming international trade accounts for Vietnam’s standout growth rate for 2011 of 6 percent, says Chris Fossick of Chicago-based Jones Lang LaSalle Property Consultants, and 6.8 percent expected for 2012. That growth has fueled the market for international hospitality and executive residences. Tourism is also growing rapidly, thanks to increasing interest in the country’s spectacular coastline and cultural heritage.

That appealing package has also drawn an influx of property development businesses and a surprisingly large expat community. Today, Vietnamese projects are increasingly funded, built, and managed by multinational partnerships. The 6,430-acre (2,600-ha) South Saigon project, for example, was master planned by American firm SOM Architects, engineered by Chinese firms, managed by a Taiwanese company, and built by Chinese and Vietnamese companies—all working in partnership with the local government.

International investment trusts also are increasingly strong participants in the Vietnamese property market. Nicholas Brooke, chairman of VinaLand Ltd., a closed-end fund based in Ho Chi Minh City, notes that he is “heavily involved in Vietnam, having had an involvement with the country and the real estate sector since 1992.” Clearly he likes what he sees: today, VinaLand is the largest foreign investment trust in Vietnam’s property sector.

Not all international firms are bullish on Vietnam, however. Richard Price, chief executive of ING Real Estate Investment Management–Asia, sees the risks as being greater than the rewards, at least for the moment. “In the near term, we have determined that the relatively small market and the structural risks of the economy do not justify the investment needed to build a competent platform there.”

Construction and engineering firms also are expressing some concern. Scott Dunn, regional managing director of AECOM’s Planning, Design + Development–South East Asia, says that three years ago, most of their planning and design work for southeast Asia was happening in Vietnam, but today they “are less involved with larger-scale planning and design work in Vietnam based on several key issues.” He cites concerns over rising inflation, high interest rates—mortgage rates are soaring to near 20 percent—and a shortage of infrastructure. Still, he sees bright spots in the health care, industrial, coastal tourist development, and themed entertainment sectors.

 mehaffy_3_351Saigon South Street View.

Some Vietnamese planning officials also are privately worried that the economy may be overheating. A senior Da Nang planning official, who asked not to be named, says that the “government is now tightening credit for property and may cut back on funding private property development because supply is exceeding demand.” He acknowledges concerns that a U.S.-style bubble could come to Vietnam. “The market in other places has created a speculative craze.”

Vietnamese officials are clearly seeking to avoid these pitfalls and, meanwhile, to use the income from new growth as a lever to accomplish longer-term social goals. For example, the Da Nang government is developing 10,000 low-income apartment units in the city, each measuring approximately 537 square feet (50 sq m) and costing 250 million Vietnamese dong (about $12,000). Buyers are being offered interest-free loans after qualifying based on income, and they cannot sell their units for ten years. “Da Nang will be a leader in low-income housing,” says the official.

The Da Nang government is also using homeownership as the keystone of a policy it calls “the Five Nos” (no hunger, no illiteracy, no begging, no drug addiction, and no crime) and “the Three Yeses” (a job, a house, and “an urbane lifestyle”). The government is also reducing development red tape and providing greater transparency in the planning process.

Government officials are placing a high priority on sustainability. The Da Nang official says sustainability in Vietnam is not just focused on energy conservation, but “must include the use of natural resources, must conserve and promote culture, and must avoid degradation of society.” The public is now complaining especially, he says, about the erosion of cultural identity.

One of those complaining—off the record—is a Da Nang hotel developer. “After rushing to catch up to the economies of the West, we have forgotten what belongs to our heritage, our local urban identity,” he says. “We’re just trying to be ‘modern.’ These projects are mushrooming everywhere, and people do it unconsciously.”

The developer sees a big challenge in controlling sprawl and ensuring sustainable development. “Economic forces are more focused on their own interests and profits, with less emphasis on social welfare issues. That’s why the role of government is important: good policies and incentives will lead the country to stable and sustainable growth.”

Demetri Baches of DPZ Pacific, a Kuala Lumpur, Malaysia–based urban planning firm active in Vietnam, puts part of the responsibility on international consultant firms. “We do a reasonably good job with the regional planning, but then we let the projects fall apart when the local politics and short-term money starts driving the building projects,” he says. “We have to do a better job following through with the implementation, and I think we have to be much more willing to warn our clients off of the unsustainable urban models of the past. Only then will more sustainable developments begin to materialize in the region.”

Nguyen, the Da Nang planner, agrees. Nguyen, who teaches at Da Nang University, is promoting a more organic model of development, combining new urbanist concepts with the “pattern language” concepts of architect Christopher Alexander. Nguyen says lectures he has given on the topic have been very well received by his planning colleagues.

“I worry that we are developing so rapidly, we are making big mistakes,” says Nguyen. “We need development that creates a sense of place and respects our local culture and identity in architecture and urbanism. But at the same time it has to satisfy economic reality. We are still a young economy, and we have a chance to show we can do it better.