St Andrews was the ecclesiastical capital of Scotland for centuries, and it still feels like a place of pilgrimage. It is set on a glorious bay and retains an air of being wild and remote but thoughtful and sophisticated at the same time.

The ruins of a castle and a vast abbey stand between the sea and the bustling old lanes of the town, while the renowned 15th-century university - the third-oldest in Britain after Oxford and Cambridge - adds a cosmopolitan air, with students and staff from more than 70 countries. The RAF base at Leuchars - the site of the nearest railway station, five miles from the town - brings a dash of fly-boy glamour to the town.

St Andrews is also, famously, the home of golf. The game's rules were set down by the Royal & Ancient club that still overlooks the Old Course, a beacon for players from around the world - although I prefer the views across the vast beach of West Sands (the backdrop for the 1981 film Chariots of Fire).

The heart of the town is a compact core of streets - The Scores, North Street, Market Street and South Street - bookended by the castle and abbey ruins at one end and the Old Course at the other. Cobbled lanes lined with beautiful stone cottages and sturdy granite tenements criss-cross the centre, while beautiful quads offer green enclaves of academe. None is more beautiful than the 16th-century St Mary's College, boasting a huge tree said to have been planted by Mary, Queen of Scots.

The university fuels a cultured atmosphere. The Byre Theatre is a modern arts centre tucked away in a pretty courtyard that offers an eclectic year-round programme from Pinter and Mamet to flamenco and opera. There are second-hand bookshops and modern art dealers, plus an array of pubs, bohemian cafés and restaurants serving an undergraduate population noted for its poshness - recent graduates include Prince William.

As well as a world-renowned university, its place in golf history also gives St Andrews an upmarket appeal way beyond any typical small coastal town. The Old Course Hotel, for example, would not look out of place in any rich European city, its old-school luxury including rooms fit for royalty and presidents, a Mappin & Webb shop and a top-class spa, alongside fine restaurants and the famous Road Hole bar. The Fairmont offers similar class down near the tiny harbour, while The Seafood Restaurant provides excellent cooking in a striking modern glass box perched above the sands by the Aquarium. A few miles south, meanwhile, are the gorgeous and atmospheric East Neuk fishing villages - Crail, Anstruther, St Monance, Elie and the artists' hangout Pittenweem. Having to go to Leuchars for trains is an irritant, although taxis are plentiful. Once there, Edinburgh is only an hour away, and there are direct trains to London, the Midlands and the South West.

The main impact of the credit crunch has been a reduction in the number of buyers; one local agent, Pagan Osborne, reports a 30 per cent fall in transactions. Linda Black, of Pagan Osborne, says: “Prices have slipped by 10 to 15 per cent across the board over the past year in St Andrews. Local surveyors are valuing properties at 2006 prices.

“We are going out every day and saying to clients that their properties are not valued at the same level as they were in March or April this year. If they put them on at the April price, they will not sell. It's as simple as that.”

Property prices start at about £125,000 for an ex-council one-bedroom flat, and rise to £250,000 for a more typical period two-bed flat, and up to £350,000 for a three-bed flat or house. Four or five-bedroom houses range widely in price depending on location, from £400,000 to £900,000, according to the Land Registry.

The diversity of buyers - the retired, holiday-home seekers, locals and investors who are often parents buying student property - helps to underpin the market. The most desirable areas are The Scores, Gillespie Terrace and The Links, where several properties have sold for well over £1million in the past year. Hepburn Gardens is another prime location, its fine stone villas within easy walking of the town centre.

Kilrymont House is a notable new development near the harbour. Originally it was a boarding house for St Leonard's School - on which Enid Blyton reportedly based her Malory Towers series. Nearly all the 24 two and three-bed apartments have already sold; prices are from £335,000 to £399,000. Another promising development, on a hill just outside the town, is The Duke's Residence, which is owned by the Old Course Hotel. This is a superb conversion of an Edwardian mansion, and will offer 16 luxury apartments by the heathland Duke's Course. Rather than outright ownership, buyers get a share of the property. Packages start at £142,000 and include club membership and full services. Completion is set for next year, but interest is high already for what will be one of the world's top golf residences. Fore!

Kilrymont House: 0845 8909457, www.knightsbridgehomes.info

The Duke's Residence: contact Peter Kempf, 07799 888199, pkempf@dcpllc.com

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