Property abroad: Palma, Spain

Want to buy a refurbished royal residence without spending a king's ransom? Try Majorca's capital, says Laura Latham

Though it is renowned for its sun-drenched beaches and celebrity property owners, including Claudia Schiffer and Michael Douglas, Majorca has a lot more to offer, not least the historic gem of its capital, Palma. The city's marina, which is packed with sleek yachts, fronts a centre of cobbled streets and chic shops, all presided over by its dramatic cathedral.

The city was once the haunt of Spanish nobility and many of its buildings are former palaces that have been converted into stylish contemporary accommodation. "Most palaces in Palma are protected," says Hans Lenz of local agency First Mallorca. "The interiors can be modernised but the exteriors cannot be changed, in order to maintain the character of the area."

The agency is representing a number of historic properties in the pretty La Lonja and Catedral districts. These range from a contemporary one-bed apartment on the top floor of a traditional casco antiguo, currently being sold furnished for £315,000, to an entire four-storey 19th-century palace, almost adjacent to the cathedral, offering a wealth of original features but in need of complete restoration, for £3.6m.

If that amount of work seems too daunting, you could opt instead for one of a number of sympathetically renovated properties First Mallorca has on its books. Many of the buildings date back to the 17th century and come with cool, internal courtyards, wide stone staircases and wrought-iron balconies offering glimpses of city life.

Apartments for sale include a two-bedroom penthouse with a designer kitchen and secluded rooftop garden for £1.7m, as well as a huge three-bedroom property in a former nobleman's house with two towers, two enormous rooftop patios and stunning views towards the cathedral. It is on the market for £1.89m.

Local developer Duncan Colbrook is in the process of renovating a 300-year-old palace into three stylish apartments, with prices starting at £710,000. He has seen an increase in interest from buyers wanting character properties, who are attracted to Palma because of its cultural life and seafront location. "There is a limit to how much of this kind of property is available," he says, "so it's increasingly sought after. Palma is an absolutely wonderful city to live in."

First Mallorca: 00 34 971 425 262; www.firstmallorca.com

Majorca: Buyer's guide

* The Majorcan government is in the process of upgrading the island's infrastructure with new roads, a bigger airport and better local facilities

* Owners renting property on a short-term basis need a licence.

* Long-term lets are currently popular. Character properties in Palma can bring in between £900 and £4,000 per month, depending on size.

* Palma is served by lots of budget and charter airlines throughout the year, with a flight time of two hours. Off-season returns can be as cheap as £40.