Milford-on-Sea has managed to retain its old-world charm in an era when many other coastal communities have been altered out of all recognition.

The village has become one of the most sought-after places on the south coast, with the inevitable impact on house prices. A new survey has found that Milford is the third most expensive seaside area in which to live in Britain.

Houses in the area cost an average of £326,277, which is good news for anyone thinking of selling their home. Sandbanks in Dorset and Padstow in Cornwall are the only two places where coastal property prices are even higher.

Mel Kendal, leader of New Forest District Council, has lived in Milford for 20 years.

He said: "It's one of the most beautiful places on the south coast. It has a wonderfully clean beach and fantastic views of the Isle of Wight.

"The seafront and clifftop areas have been refurbished but retain their unspoilt openness."

Often described as the only remaining coastal village in Hampshire, Milford boasts a typical village green, surrounded by a variety of traditional shops. Despite its image as a popular retirement area, it also has one of the few primary schools where pupil numbers are rising.

Bob Bishop, vice-chairman of the local parish council, said: "Milford is a splendid place to live and has a tremendous community atmosphere.

"We've got a wonderful village green, the beach, the cliffs and the creek at Keyhaven."

A leaflet published by the parish council cites Milford's old-world charm and adds: "Here you will find a quiet, uncrowded beach with good clean bathing. The view of the Needles and the Isle of Wight is unsurpassed."

The survey was carried out by Halifax Estate Agents, which found that Britons are prepared to pay thousands of pounds extra to have a house by the sea. The average home in a coastal community costs three per cent more - about £5,298 - than similar properties inland.

A Halifax spokesman said: "Seaside towns tend to have house prices that are at a premium."

The survey concluded that Christchurch in Dorset offers the best quality of life in terms of housing, health, education and environment.