Marrakesh, in the foothills of the Atlas Mountains, has long been a fabled destination for travellers and traders alike, but now more than ever it is attracting another breed of fortune seeker. Professional property investors, second-home buyers and people seeking a change of life are being drawn to the city.

Estate agents report huge overseas interest, particularly from British investors, in the desert city. Alban Pamart, of Atlas Immobilier, says: “Seventy per cent of our clients are British. We are now seeing people coming to Morocco specifically to buy.” As a result, prices of traditional tiled Moorish houses known as riads have risen by nearly 50 per cent in two years.

Mr Pamart says investors should spend a minimum of €300,000 (about £205,000) on a small riad, although it would be easy to spend twice as much. Savills, which has just started selling in Morocco, is marketing a seven-bedroom riad, Zaouia El Abbassia, for €850,000.

Despite its reputation as one of the most tolerant Muslim states, potential investors should be aware of the British Government’s advice, after the 2003 bomb attacks in Casablanca, that there is a “high threat of terrorism in Morocco”.

Many overseas buyers are drawn to the new developments springing up outside the old Medina district of Marrakesh. These tend to be luxury villas with private pools aimed at professional property investors and wealthy individuals. Julien Lu, a director of the French-based developer Imoinvest, has just sold 20 villas off-plan in the Ourika valley, south of Marrakesh, for between €440,000 and €800,000 — mostly to British buyers.

One of the most talked-about developments in Marrakesh is by Canada’s Four Seasons group, which, with Knight Frank, is building 20 villas and 20 riad-style houses in the grounds of a luxury hotel in the modern part of the city. Despite their high prices — £450,000 to £740,000 — Paul Rogers, of the marketing agent Hamptons, predicts that the villas will sell fast.

Paul MacSherry, of Premier Resorts, agrees that interest is high: “I’ve met professional investors who say Marrakesh is the new Dubai.” He has ten luxury villas 28 miles south of Marrakesh at Bab Adrar d’Atlas, from £560,000 to £650,000, on his books. Customers can also buy a share of the freehold from £85,000.

Although rental yields are difficult to predict, Premier is offering a guaranteed rental return, for two years, of 6.5 per cent net.

Tourist numbers are rising and King Mohammed is trying to increase visitor numbers to ten million a year by 2010. Access is also improving. British Airways now flies from Manchester, Heathrow and Gatwick. Royal Air Maroc has developed Atlas-blue as a budget airline, and European budget airlines are considering Morocco, just three hours away from Britain.

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But investors looking for a better rental income might consider the coastal areas, where lower prices will boost yields. Six purpose-built coastal resorts are being constructed. The first phase at Saidia, on the Mediterranean coast, is due to open in June. The Moroccan specialist Saffron Villas is offering anything from one-bedroom apartments at £60,000 to three-bedroom villas at £

190,000. These might rent at £1,000 a week and the season should be all year.

Morocco would seem to be poised for take-off for the professional investor, although second-home buyers might care to tread cautiously.

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