Just a few years ago, Tay Ho was a sleepy cluster of fishing villages on the northern outskirts of Hanoi. Tourists rarely ventured out here – and neither did locals.

“People asked why I was opening a restaurant all the way out there. Back in 2003, there were only fish farms and noodle shops here. Fraser Suites [a luxury apartment complex] was a bomb crater,” recalled Canadian chef Donald Berger, whose lakeside district bistro, Don’s, was Vietnam’s only entry on the 2013 Asia’s 50 Best Restaurants list.

But since 2010, when a paved road was built around Ho Tay – the lake after which the neighbourhood is named – an influx of creative expats and locals have transformed the area, opening chic boutiques and bistros infused with a Vietnamese sensibility. At 68 Xuan Dieu, Lacquer and More presents brightly lacquered bowls and cupboards made using traditional techniques. Nearby, Module 7 showcases clothing from Kilomet 109, a fashion label that incorporates textile weaving and dyeing techniques used by ethnic minority tribes into contemporary designs.

Take a break from shopping at Oriberry, a lakeside cafe serving single-origin, Fairtrade Vietnamese coffee. Then check out the other socially-conscious shops that have cropped up close by, such as Betterday, which sells tea, coffee, cashews and spices sourced from local farmers – and is not to be confused with Better World Hanoi, a gift shop that donates 5% of profits to Mines Advisory Group (MAG), a not-for-profit organisation dedicated to removing unexploded ordnance. It sells an array of Vietnamese goods, from herbal soaps to hand-stitched iPad covers.

Residential area at the Ho Tay Lake in Hanoi. Photograph: Alamy

On Saturday mornings, locals browse the Tay Ho weekend market (Ngo 67 To Ngoc Van) for small-batch products such as honey hand-pressed by tribes in the northern province of Ha Giang and essential oils from natural perfumer Dame Clemence; there’s even a neighbourhood mix of jasmine and coriander called Les Nuits de Tay Ho.

Although you’ll still find roadside vendors making pho and banh mi, a growing number of Tay Ho chefs draw on Vietnamese ingredients to create innovative fare. At Don’s, chef Nguyen Van Tu makes dishes such as Nha Trang lobster and coconut milk chowder with vanilla and lemongrass (£7). A few blocks away at Daluva, the seasonal tasting menu includes feta made with goats’ milk from a farm just outside the city and clams steamed in cucumber juice and ginger. At night, the neighbourhood bar scene offers several options: from the tranquil resto-lounge of Dieu’s Cuisine to rowdier Hanoi Rock City.

A leisurely stroll around the lake brings you to Chula, where owner Diego Cortizas and his wife Laura Fontán print Vietnamese embroidered silks with vivid Spanish patterns. In an early-20th-century villa, the shop hosts evening concerts and art exhibitions. With its artisanal products and bucolic setting, Chula exemplifies the Tay Ho mentality of looking to the future while embracing the past.