Those looking to snap up a bargain holiday home in Italy are likely to be disappointed. Rupert Fawcett, head of Knight Frank’s Italian desk, said: “Historically, property prices in Italy have always held. Italy’s second-home market has been largely unaffected by the recession. Forced sellers are rare as most properties have been bought as a long-term purchase. Prices have fallen on average 10 to 20 per cent and now, similar to the UK, prices have started to curb.”

Commanding the highest prices are prime areas such as Lake Como and Venice, and niche places such as glitzy Capri, and its lesser-known neighbour, Ischia.

Ischia is a small volcanic island in southern Italy’s Gulf of Naples, where strict planning regulations coupled with the fact that residents hardly move means property is in short supply and prices are high.

Hidden on the island’s Lacco Ameno coastline is Villa Isabella — an exclusive complex of apartments, which overlook the Gulf and pretty coastal town of Lacco Ameno itself. Once a grand 1950s residence, Villa Isabella was bought by Partenhotels, an Italian real estate company, and Fonsicar, a Luxembourgian investment fund, in 2007 for €6 million (£5.4 million). It has been restored and converted into seven, two- and three-bedroom apartments. Partenhotels also owns L’Albergo della Regina Isabella, a luxury five-star spa hotel set below Villa Isabella, where Elizabeth Taylor, Richard Burton and Charlie Chaplin once stayed. Villa owners and their guests haveaccess to all the hotel’s facilities, including its 60-room medical spa, Le Terme.

Ischia also hosts two international film festivals and villa owners are invited to all film festival events.

Each apartment features high-spec interiors with contemporary bathrooms and kitchens and spacious floor plans — the largest is 3,821 sq ft. The inclusion of private plunge pools, saunas and spa baths, is intended to create the ultimate luxury retreat. The sea-view terraces — some almost as large as the apartments — are perfect for al fresco dining. The villa is set in a Mediterranean garden, scented by a lemon grove and pine trees.

But luxury this blissful is rarely cheap. A two-bed apartment starts from €2.7 million and the most expensive three-bed costs €3.5 million. None of the apartments has yet sold. The villas will be completed next year and finished to buyer specification. Buyers can choose to rent privately or through the hotel for a yearly fee. The rental income will be split 50-50 between the owner and the hotel.

The isle’s pine-covered mountains, vineyards, golden beaches and mineral-rich thermal hot springs, means the isle has long been a haven for well-heeled Italians, Germans and Russians — but it still remains relatively unknown to British holidaymakers and second-home buyers.

Its mountainous interior is perfect for hiking and cycling, while the atmospheric Aragonese Castle is among some of the island’s highlights. You can arrive by hydrofoil, which takes 40 minutes from the Port of Naples. Direct flights from London Gatwick to Naples take 2hr 45min.

Times recommends

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