Jane Austen reputedly fainted on hearing that her family were to move to Bath in 1801. If the novelist were alive today, she might have the same reaction on hearing how much she would have to pay for a house there.

Prices have been rising steadily in this pretty West Country city. Between 2005 and 2006, according to the latest Halifax figures, house prices rose 10% compared with 8% in the rest of the southwest. The average house price in Bath now stands at £269,473; the UK average is £199,568.

To give some idea of how buoyant the market is, a house along the Circus, Bath’s most prestigious address, a stone’s throw from Gay Street, where Austen lived, has just gone under offer at £4m. Admittedly, the buyer of No 7 is getting a lot for their money: 9,600sq ft of heritage accommodation.

Christine Penny, associate director at Hamptons’ Bath office, which is jointly marketing the property with Knight Frank, says there has been a big rise in demand for “lifestyle-orientated property” at the top end of the market. Buyers in the £1.5m-£2.5m bracket are fleeing London, but though they want a slice of the rural idyll, they often also want nearby schools and amenities.

“Bath depends very heavily on the London market,” says Penny. “That has to be the top reason why it’s doing so well.”

The city has always lured wealthy incomers. The Romans sought comfort, cures and cleansing from its hot mineral springs. Though Bath fell into decline with the collapse of the Roman empire, the virtues of its waters were rediscovered towards the end of the 17th century, and visits by Queen Anne in 1702 and 1703 gave the city the seal of royal approval. Pitt the Elder, David Livingstone and Clive of India were all seduced by Bath’s myriad charms.

“The quality of life is outstanding,” says Chris Hart, partner in charge of Knight Frank’s Bath office, which opened just over a year ago. “It is a remarkable town.”

Communication links are excellent: it is only 90 minutes by car and rail from London. There is a huge choice of good schools in both the state and private sectors, two universities, a theatre that previews West End shows and good shops. Best of all, it is on the edge of an area of outstanding natural beauty, so green hills will always be part of the skyline.

In August, the long-delayed £40m Thermae Bath Spa finally opened, and although agents have not seen a direct effect on property prices as a result, it has boosted the city’s already hefty tourist economy.

Then there are the buildings. Bath is a Unesco World Heritage Site full of elegant, honey-hued Georgian stone houses; it has 72 Grade I-listed properties. As well as the Circus, highlights include the Royal Crescent, Beckford’s Tower and the Assembly Rooms. A house near one of these locations would set you back about £3m, but there is still desirable property available with a slightly less steep price tag: for about £1.5m, you will get a Victorian or Edwardian terraced house at the very least. A six-bedroom Regency house, 10 minutes’ walk from the town centre, alongside the Kennet and Avon Canal and with views of Bath Abbey, is for sale for £1.5m with Knight Frank, for example. Such is the demand for houses that even postwar properties are popular. At about the £1m mark, Penny says these are being snapped up by families, who see the potential for extending and altering the originals.

Those on a tighter budget need not despair. The Bath Western Riverside regeneration scheme covers 70 acres of brownfield land by the River Avon, and Crest Nicholson, the developer overseeing the project, has just received outline planning consent for 2,500 units, 30% of which will be affordable housing. The new homes have been designed to meet the city’s current housing need for smaller units, and will mainly be one, two- and three-bedroom flats, with some three-bed houses. Buyers face a bit of a wait, however: although work is scheduled to start late this year, the first phase won’t be available until 2011.

Patience is the only way to approach a property purchase in Bath. The city, says Hart, has a strong local base; once people move to it, they stay put.

It’s a far cry from Austen’s experience: she spent six not entirely happy years in the city before hotfooting it down the road to Bristol. Had she seen Bath today, she might have preferred to stay.

- Hamptons, 01225 312 244, www.hamptons.co.uk; Knight Frank, 01225 325 999, www.knightfrank.co.uk

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