Unilke many European capitals, most areas of London are clearly defined: they are either residential or commercial. Genuinely mixed areas are difficult to find. Fitzrovia, in the heart of the West End, is a rare exception. “Fitzrovia offers a lively mix of life and work,” says Jonathan Hudson, managing director of Hudsons Property and a Fitzrovia resident. “There are media firms, the remains of the rag trade which used to be a big feature of this area, and more and more galleries. Plus there is a wide range of property owners - young families, singletons, the wealthy of every description.”

Fitzrovia, named after Fitzroy Square, straddles the border between Camden and Westminster: it forms a rectangle bounded to the north by Euston Road and to the south by Oxford Street, from Great Portland Street in the west to Tottenham Court Road in the east. Although some might imagine that anywhere near Oxford Street - particularly during the sales - resembles the seventh circle of Hell, Hudson insists that Fitzrovia residents are undisturbed by the crowds. “People out shopping on Oxford Street don't wander off the main drag. Charlotte Street is a delightful place to be on the weekend.”

Being in the centre of things has its advantages. You are within a stone's throw (or a very short taxi ride) of Euston and the Eurostar terminal at St Pancras, Selfridges is on your doorstep, as are some of the best restaurants in the capital. “You are also within walking distance of Regent's Park, the Embankment, Mayfair and Shepherds Market. Plus, if you live in Fitzrovia, you can park anywhere from Charlotte Street to Lancaster Gate,” Hudson says.

Of course, all this comes at a price. But Fitzrovia remains affordable relative to traditional Central London locations such as Mayfair and Marylebone, as well as to its edgier neighbour, Clerkenwell. While Clerkenwell has become a magnet for City workers looking for urban loft living, Fitzrovia attracts a wider cross-section of people. “Fitzrovia attracts a transient population,” says Anne Currell, of Currell Residential. “It appeals to the European market.”

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This part of London has come a long way over the past 30 years. “The market has been completely transformed,” says Julian Lewin, of Hurford Salvi Carr, an estate agent specialising in Central London. “I have been working here since 1983: back then we were struggling to sell one-bedroom flats for £25,000 to £30,000.” Today a one-bed flat in Fitzrovia costs from £385,000, while two-bed flats start at £475,000. Houses sell for about £1.5 million.

Prices in the area have risen as part of the general Central London boom over the past few years, but there are other drivers, too. “People have really woken up to this area,” Lewin says. “And people have been priced out of Marylebone, so they're spilling over into Fitzrovia.” The refurbishment of St Pancras and the arrival of the new Eurostar terminal have helped. Liam Bailey, head of residential research at Knight Frank, says that King's Cross will outperform as the market recovers from what is likely to be a difficult year: “Within less than a decade this area will be a significant new residential and commercial quarter, with arguably the best transport infrastructure anywhere in London.”

Hudsons is selling a two-bed flat on Fitzroy Street for £895,000, as well as an unusual lateral conversion of three period properties on Whitfield Street. The third-floor apartment has three double bedrooms and two bathrooms and is for sale for £980,000. Hudsons says that there has been a slight adjustment to prices at the lower end of the market - up to a 2 per cent drop - as a result of the global credit crunch, but that the £900,000-plus sector is unaffected.

It is not just homeowners who have noticed Fitzrovia's potential. Developers and institutional investors are also showing a considerable appetite for local property. “Big investors are spending vast amounts of money in Fitzrovia,” Hudson says. “The area around Cleveland Street offers fantastic investment opportunities, as it is still improving, with better restaurants and shops coming into the area.”

As with most parts of Central London, the supply of property is very limited, and the shortage is likely to worsen as the market slows. Demand, however, remains robust. “More people are now willing to substitute size for location to avoid the daily commute, and there are more affluent buyers who want a pied-à-terre,” Hudson says. “There is a strong investor market too, with money pouring in from all over the world.”

There will be a boost to supply once Candy & Candy has redesigned the interior of the old Middlesex Hospital, but this is still a few years away. The £1 billion luxury scheme, which will be known as Noho Square, will house 273 apartments as well as 33,000 sq m (355,000 sq ft) of office and retail space. Penthouse flats could sell for as much as £10 million each, although the developer, Project Abbey (Guernsey), is also obliged to offer some affordable housing.

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