With house prices falling, the temptation for those desperate to get on to the housing ladder is to opt for the first property that slips into their price range. In many cases, this is a studio. “When the market weakens and prices slip a little, it brings studios within reach of a wider audience,” says Andy Finch, the head of new homes sales in Manchester for Knight Frank.

But should you simply purchase the first property that comes into your price range? Or should you hold out until one or even two-bedroom properties become a realistic prospect? The main - some might say only - attraction of a studio apartment is price. “Buyers can save between £20,000 and £25,000, compared with a small one-bedroom unit,” Finch says. Not only does this mean that your deposit can be smaller, but - since most studios cost less than £250,000 - your stamp duty liability is significantly reduced: the difference between the stamp duty on a £250,000 and a £250,001 property is more than £5,000.

While cheaper than one-beds, studios may not represent great value. “Estate agents are now valuing property on the price per square footage, and this is not very flattering for studio apartments,” says Russell Hunt, of Property Hunt. But Nicholas Ayre, of the property finders Home Fusion, cautiously extols the well-priced studio: “At around £250,000 they can be a good buy. I have seen a couple of studios in the West End that have been on the market for a year: they won't sell because they're on at the wrong price.”

There are drawbacks to a one-room flat. A separate bedroom provides first-time buyers with the option to let a room if their monthly mortgage payments rise. And studios rarely provide a long-term base. “Buyers and tenants grow out of studios more quickly than one-bed flats,” Hunt says. And this is a niche market: studios may sell well in tough times, but once the outlook improves they become much less attractive. “The market for studios is very select, so in a buoyant period, they could prove tricky to sell,” Hunt says.

The finance for a studio can also present problems. “Lenders are not keen to lend on studios,” says Melanie Bien, of the independent mortgage broker, Savills Private Finance. “Much depends on the size of the property: they will want it to be at least 380sqft before they will lend. Part of the reason is concern over the resale value: there is far more demand for one-beds than studios, so it should be much easier to sell the former than the latter - and that protects the lender's investment.” Despite this, studios can make decent buy-to-let investments. “They are affordable for tenants and can produce a great yield for landlords,” Finch says.

“If you are buying as an investment, a studio needs to be in a prime central location - places like Mayfair - with plenty of restaurants nearby, because you don't want to have to use the tiny kitchens,” Ayre says. Hunt agrees that location is key, although he argues that you do not have to buy in prime Central London: areas within easy reach of the City are also attractive. “The right location, such as Docklands, Whitechapel or Spitalfields, is crucial in buying a successful pied-à-terre investment,” he says.

Hunt says that despite projections of heavy job losses in the City - some put likely job cuts as high as 40,000 - demand for studio rentals will remain strong. “It seems the current policy in the financial world is ‘two out, one in', so firms are still hiring and there is still a huge workforce that needs somewhere to sleep.”

Outside London, studios are also seen as attractive investments. “There are three main purchaser types for studios in the North West,” Finch says. In addition to first-time buyers and senior managers looking for crash pads, studios are being snapped up by investors.

Smartpads, which form part of the KWLinfoot development at Salford Quays, are a good example. “They are conservatively priced and it's my opinion that they will hold their value,” says David Waddington, of KWLinfoot. “You'll be benefiting from the micro-market conditions that have been created by the redevelopment of Salford Quays and neighbouring Media City, where 15,000 new jobs are being created.”

Studios tend to perform best as short lets. Rents on tenancies of up to six months are higher than on longer-term lets, and in many cases rents are received upfront rather than on a monthly basis.

Not all properties are suitable for short-term lets, however. Some councils, notably Westminster, try to discourage shorter tenancies, and some freeholders do not allow them at all.

Case study

One-bed flats in Ladbroke Grove would usually sell for £400,000, so when Trevor Baxter found a studio on Cambridge Gardens for £217,500 he snapped it up. Baxter, pictured in the 330 sq ft property, owns a home outside London but spends most of his time here with his partner, Marilyn Clarkson, and their two pet labradors. John Savage, of Winkworth, the agent, says: “There is a lot of interest in studios from owner occupiers and investors - and in this area, there are a lot of buyers with no shortage of cash to buy.”

Studios for sale

Wolsey Road, East Molesley, Surrey

A ground-floor studio, pictured above, with garage and off-street parking, in a red-brick period building less than half a mile from Hampton Court railway station. £249,950.

John D.Wood & Co , 01372 462211

Talbot Road, London W2

Characterful top-floor studio, with exposed brick walls and wood floors, in a stucco-fronted building near Westbourne Park Tube. £350,000.

Faron Sutaria , 020-7229 2404

Parkwest, Kensington Apartments, West Drayton, Middlesex

Large Manhattan-style apartments with a sliding partition allowing you to separate the bedroom. Studios from £204,950.

Knight Frank , 020-7173 4999, www.park-west.co.uk

Manyoo Smartpads, Salford Quays, Manchester

Available off-plan from £98,500, and with interior design from Philippe Starck, Smartpads form part of a KWLinfoot development that will be completed in 2011.

Manyoo , 0113-391 6300,

Macintosh Mills, Manchester

Ground-floor studios (446sqft), with barrel-vaulted bare brick ceilings, priced at £138,000.

Knight Frank , 0161-838 7744 citylofts.co.uk

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