What a difference a year makes. Demand for holiday and second homes in the honeypot coastal resorts of Devon in south-west England all but disappeared last year. Recently, however, the market has bounced back, particularly in the South Hams region, where agents report brisk business. “Things have definitely got busier in the past month, and more expensive properties [£2m plus] are under offer,” says Piers Vaux of buying consultancy Property Vision.

“The market has levelled,” says Sue Bushnell, director of property-finding service County Homesearch’s Devon office. “Good properties are now achieving their guide price, which they were not six months ago,” she says, adding that homes in the £500,000-£1m range have only dipped between 15 per cent and 20 per cent (although homes above £1m have seen falls of up to 40 per cent). One reason prices have held up is a lack of supply. “We have not seen many vendors come to the market but we hope that will happen in the autumn or next year,” Vaux says.

Buying in this part of Devon has never been easy. The South Hams landscape of gentle green hills, valleys, creeks and rivers that undulates from Totnes and Dartmouth in the east to the village of Newton Ferrers, just outside Plymouth, in the west, is a designated area of outstanding natural beauty and one of the most heavily protected parts of England.

With unspoilt beaches such as Beesands, Blackpool Sands and Hope Cove, as well as deep, sailing-friendly estuaries in Dartmouth, Salcombe and Newton Ferrers, South Hams is a popular holiday spot. Not surprisingly, perhaps, almost 10 per cent of properties in the area are second homes, according to estate agency Savills. The average price of a three-bedroom house or cottage with a sea view is between £500,000 and £600,000. “There is roughly just 10 per cent difference between the price of a South Hams cottage and a London townhouse. It is the most expensive part of Devon,” Bushnell says.

The focus of the region is the picturesque naval town of Dartmouth, which has a busy marina, chic shops and fashionable restaurants. Celebrity chef John Burton Race has a popular eatery here and crime novelist Agatha Christie used to live just outside. An impressive castle stands guard at the estuary mouth while pretty cob and thatch villages such as Dittisham, Stoke Fleming and Thurlestone are tucked away along nearby creeks and in valleys.

“Dartmouth and Salcombe have deep water estuaries and lovely beaches,” Bushnell says, “and property in these towns has only dropped 5-10 per cent.” At Dart Marina in Dartmouth, a quayside development of 33 town houses and apartments launched in 2006, only four homes (starting from £395,000) remain, while in Salcombe, Bushnell says, “A client had to pay £10,000 above the guide price [£500,000] as there were two other cash buyers after a two-bedroom apartment.”

Salcombe’s affluence is evident in the surprising number of cutting-edge modern homes for such a traditional small town. “In 2006 and 2007 a lot of turn-of-the-century properties were knocked down and rebuilt as something contemporary,” says Vaux. “Carpenter oak properties made out of green oak and glass are very popular and take advantage of the lovely views,” says Sandy Davenport of estate agency Knight Frank. Such homes do not come cheap, with £1m being the average starting price.

Step outside the twin hotspots of Salcombe and Dartmouth, however, and the market becomes significantly less inflated and less competitive. Houses “on the edge of a village where you can walk to the pub and with an acre of garden,” are popular, says Bushnell. “A lot of people do not want to be out in the sticks but, equally, they do not want to be in the centre of a village. They want to be part of a community but not right in it.” Estate agency Stags is selling a beachside five-bedroom terraced house in South Hallsands, a small village 12 miles from Salcombe, for £545,000. Next door, perched on a cliff-top, is Prospect House, a former 1920s hotel converted into 16 creamy white New England-style apartments and houses with a communal outdoor heated swimming pool and a tennis court. With dramatic views of Start Bay and its lighthouse, 10 homes sold almost immediately following the development’s launch in 2006. The remaining six apartments, all with stunning sea views, start from £360,000.

Tom Tingley, a former commercial manager turned reiki healer from Wellington, Somerset, bought a two-bedroom, two-bathroom, ground-floor holiday apartment with terraces in the development for £295,000 in 2006. Even in today’s market he reckons it is now worth £370,000.

“Hallsands has a golden postcode. Salcombe, Dartmouth and Kingsbridge are all close and from a financial point of view the apartment is very lucrative,” says Tingley, who lets his holiday home for between £1,100 and £1,300 a week in July and August.

Demand for holiday accommodation in Devon has never been higher. Lettings enquiries have increased 43 per cent compared with last year, with those in the South Hams area up 75 per cent, according to Holiday Lettings, a second home advertising website. “This is very much an area of undersupply, where demand for accommodation is high,” says company spokesperson Kate Stinchcombe. Lettings agency Coast and Country says a three-bedroom house on the coast would fetch about £1,295 a week during August, while a similar home inland would let for £925 a week.

Away from the coast, house prices dip. “A water frontage increases the value of a house by up to 50 per cent,” says Davenport. “A bungalow 10 minutes’ walk from the sea is half the price [of one on the coast].” Bushnell frequently advises clients on a tight budget to avoid the coast completely and look for a home inland – on average about five miles. “If you do not have to have a sea view, you will save yourself an awful lot of money,” she says. A three-bedroom detached cottage in a village such as picturesque South Milton, three miles from Hope Cove, is roughly £450,000. “It would be £600,000 on the coast, more if in Salcombe”, Bushnell says.

Such prices are not only kept buoyant by second home owners. South Hams is also increasingly in demand among relocating first-home owners – particularly from London. “In recent years the lifestyle downshifting trend has seen more people move their families out of the cities, and we are seeing much more weekly or part-week commuting,” says Liam Bailey of Knight Frank.

Tina and Paul Riley have been running residential painting courses at Coombe Farm Studios near Dittisham for almost 30 years. “When we first came down here, only people who were going to completely change their lifestyle could come here to live. Now anyone who can work at home with a computer and commute to London for a couple of days can come,” Tina says, adding that this has brought both benefits and problems. “There is a crisis in accommodation. Local people cannot afford housing here because the number of second homes and holiday homes is huge but there are many more galleries, good restaurants, and there is employment in the form of boating and leisure activities. Originally we could not run painting courses in the winter. Now we can. People do love to come down here.”

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Estate agencies

Knight Frank, tel: +44 (0)1392848822, www.knightfrank.com
Stags, tel: +44 (0)1803835336, www.stags.co.uk
Property Vision, tel: +44 (0)1392311530, www.propertyvision.com
County Homesearch, tel: +44 (0)1769560256, www.countyhomesearch.co.uk