With its whitewashed cottages clustered around old fishing harbours, rowing boats bobbing in creeks and pink valerian running riot over granite walls, Cornwall is the ultimate county for holidays — and holiday homes.

A decade or so ago, you could pick up a picturesque farmhouse set in rolling pasture or a flat with a spectacular sea view for next to nothing. The average value of a property in 1999 was £65,000, according to the Land Registry; by April last year, prices had reached a peak of £210,000. The British public had fallen back in love with the seaside, and Cornwall had become the top destination, whether for sailing on the south coast or surfing on the north, with the option of a fish supper at a Rick Stein or Jamie Oliver restaurant — if you could get in, that is.

Today, there may still be queues for pricey grub, but the same cannot be said for the estate agencies. Where once holidaymakers rushed like bees around a honeypot to buy a bolt hole in Cornwall, paying handsomely for the privilege, this summer the buzz is somewhat subdued. Now it’s all about bargain-hunting.

House prices in the home counties may be getting back on track, but a six-hour drive down the A303, the Cornish market is yet to feel the wave. The average price of a home in the county has now fallen back to August 2004 values. Only a few rarefied spots have survived a financial battering; even the surfing capital, Newquay, which 12 months ago looked as if it was defying the slump, is suffering — an estimated 600 flats are unsold, partly built or in the planning pipeline there.

“For the first time in recent memory, there’s a chance to buy into the laid-back lifestyle,” says Jonathan Cunliffe, head of the Truro office for Savills estate agency. “The top end of the market reached its bottom earlier this year, and holiday cottages are being pursued by investors; but with the mass market dependent on mortgages and buying chains, there are bargains to be had.”

This is especially true in the middle range — properties valued between £350,000 and £1m. In some instances, prices are down by 35% from the peak and properties are still not selling.

Cunliffe cites Laity Farm, a fourbedroom stone house four miles from Falmouth, with 21 acres and stables,which he is selling for £895,000. Two years ago, he estimates it would have had a price tag of £1.25m.

“This summer could be your chance to buy close to the best locations — St Mawes, Rock and the Helford,” Cunliffe says. “You are no longer competing against the banker and his bonuses. This is likely to be the only year with this window of opportunity.”

It is an optimistic and almost Candide-like opinion. Nobody can predict the housing market and wider economic climate with any degree of certainty, but buyers who for years have dreamt of living in Cornwall or buying a bigger house in the county feel they can’t afford to miss out.

It may not be the best time to sell, but Katie Hogg, 45, knows that by trading up in the downturn, she should be able to get a better deal on her next property — and, this time, even afford a good sea view.

Hogg, who runs a chain of shops selling seasonal beach gear, fell so heavily for the Cornish countryside in the mid-1990s that she bought Trevessa, a slate-hung Georgian farmhouse in Summercourt, a hamlet near Newquay. It sits in half an acre of land and looks out over the Duchy of Cornwall estate. She and her four-year-old daughter, Tilly, now plan to move to a larger property further west, with a herd of pedigree Holsteins. “I’m upgrading to a bigger farm,” she says.

She has put her five-bedroom farmhouse, which was built in the 14th century and has “thick walls that make it cool in summer and keep the heat in winter”, on the market for £799,950 through Jackson-Stops (01872 261160, jackson-stops.co.uk).

The fashionability — in a salty, Martha’s Vineyard kind of way — of estuary villages such as Helford and Fowey makes for curious disparities in the market. Five of the 10 most expensive seaside towns in England and Wales are in Cornwall — St Mawes, Rock, Fowey, Falmouth and Bude — with prices in Rock increasing by 200% since the survey by the Halifax building society was launched in 2001. Yet move a couple of miles inland, along a clifftop closer to a caravan park, or even just across the road, and prices can halve.

There are two sides to this county, which, in terms of wages, is the poorest in England. Much of the centre is a post-industrial landscape, its towns bearing the pinched look of their tin-mining days. The spoils from the china clay mines have been formed into mountains like the tops of bald heads; at Delabole, a vast abscess has been dug into the earth to extract slate. On the coast, along the estuaries and in the prettier inland hamlets, resentment can flare up against secondhomers who are “JDFL” (Just Down from London).

This means location is even more important, and adjacent settlements command quite different prices. Mousehole (pronounced Mowzell) is a deliriously lovely fishing village, with vertiginous alleys and views over the slate roofs and vegetable patches to St Michael’s Mount. A three-bedroom flat overlooking the harbour, converted from the old Lobster Pot hotel, is for sale for £525,000 with Marshalls of Penzance (01736 360203, marshallsestate-agents.co.uk). No more than a mile and a half down the road, you can buy a four-bedroom semi in Newlyn — a working port, but pretty, and with a better view of St Michael’s Mount — for £335,000 from Chesterton Humberts (01872 278288, chestertonhumberts.com). It’s on three floors, and “sunsets and the moon reflected on the water can be breathtaking”, gasp the particulars.

Even though values and the volume of sales are down on the boom years, some estate agents are reporting increased activity. Andrew Chilcott, a director of the Truro-based estate agency Lillicrap Chilcott, says it has sold £50m worth of property in the last quarter; and that’s not just top-end estates, but homes with an average price of £470,000. “We’ve been astonishingly busy,” he says. “Realistic pricing is the key. People want to buy in the most affordable, fashionable town they can.”

Chilcott says that Mawgan Porth, a few miles north of Newquay and near the airport (from which Airsouthwest flies twice every weekday to London City, making it almost commutable) has proved a particular hot spot. He also cites St Ives, Carbis Bay and nearby Marazion as good value.

“London and home-counties buyers are slowly coming back,” he says. “They are looking for a safe haven.”

Andrew Jeffery, a past president of the National Association of Estate Agents, sees a similar picture from the Bodmin office of Webbers. “The market for pretty farmhouses with enough land to buy privacy died for a year,” he says. “Now it’s back.”

Buoyed by green shoots, buyers from the Southeast have a little more confidence, even a spring in their step, and are planning their retirement now. The aim? To make use of their capital now and get the best deal they can.

It is exactly what Graham Rose, a big shot in advertising — he did the Hamlet cigar campaign, the one to Bach’s Air on a G String — is planning to do.

Rose and his wife, Pauline, both in their fifties, are selling Trewogan, their seven-bedroom castellated mansion near Falmouth, for £5m through Savills (01872 243201, savills.co.uk). They have turned it into a stylish modern home, but now that their daughter has left university, they hope to find a smaller place in Cornwall for down time and a larger one in London as a permanent base. “It’s been an amazing house,” Pauline says. “The coastline here is mind-blowing: seeing it from the water still takes my breath away.”

- Clive Aslet is editor at large of Country Life

Times recommends

• Second homes: credit crunch casualty or money-spinner?
• How I built my own sliding house
• Top 10 incentives for house buyers