If you were to answer the question, “What’s the best city in the world?,” the sprawling urban metropolises of Rome or Bangkok might initially spring to your mind. But sometimes it’s the smaller villages and towns — the hidden gems of the world — that truly ignite the senses and spark instant memories for modern travelers.

San Miguel de Allende, a small colonial city in the state of Guanajuato in eastern Mexico, is one such destination. This year, it took Travel + Leisure’s award for The World’s Best Cities, surprising some. Others, who are more in tune with global travel trends, may have expected it. San Miguel de Allende, after all, has long attracted visitors from all over the world with its quaint cobblestone streets, authentic Spanish colonial style architecture, gastronomy and temperate year-round weather. There are also festivals year-round, and other must-see spots like hot springs, an organic market, the Casa Dragones Tasting Room (where you can sample Oprah’s favorite tequila) and the iconic Parroquia Church. It has even been called  “the Hamptons of Mexico City,” since it only takes three hours and you are in a completely different world where you can relax yet enjoy a vibrant social scene of parties, festivals and great food and wine.

“San Miguel has a very special magic,” explains Daniel Ortiz, director for Coldwell Banker Smart Realty in San Miguel de Allende. “It is the mix of the culture here — from music to art to food and the weather, but most importantly the people who live here. I once heard that people who live here choose to live here and that makes it very special.”

According to Ortiz, San Miguel’s star has been rising for the last few years. The combination of awards and accolades (from Condé Nast’s 2013 “Top 25 Cities in the World” to New York Post’s 2014 “20 Hottest Real Estate Spots in the World“) has elevated the city’s popularity — and its luxury real estate market.

“San Miguel was already very popular among foreigners for several years even before the announcement from Condé Nast, but it has definitely given San Miguel a new push,” says Ortiz. “Every person has a very unique story why to end up in San Miguel and not anywhere else in the world. So many foreigners could live wherever they would like to — whether it’s in the south of France, Italy or Hawaii — but they decide to live here. The community of San Miguel is very open, very welcoming and there is something new to explore every day.”

With all of this acclaim, Ortiz characterizes the city’s high-end housing sector as “secure” right now. Each year since the 2008 recession, growth has risen steadily. Prices “are up about 30%  in the highest demand areas and about 20% in areas of the outskirts of town. I believe we are back to the prices we had before 2008. Buying a home here is a solid investment,” he adds.

Who’s Buying

In San Miguel, most sales registered in the local realtor association are Americans, then Mexicans, some small percentage of Canadians and others.

“It is not hard to buy real estate as a foreigner,” says Ortiz. “You have to obtain a permit from foreign affairs to be able to buy, but it is just a step in the process.”

According to Ortiz, the luxury buying power remains most concentrated among older generations of internationals. However, more and more younger buyers are beginning to buy in San Miguel.

“We have some very good bilingual schools and with the technological development, you can work from everywhere in the world nowadays,” says Ortiz. “That makes San Miguel very attractive for an intercultural experience for young families.”

Where to Buy

“Most people are buying luxury homes in the city center,” in the Centro Histirico and Centro district, says Ortiz. This area has always been in high demand, with equally high prices to go along with it — because “there are nearly no lots available and the inventory is selling fast when something comes up,” he adds. “With limited inventory and no room for expansion, these areas will continue to be in demand,” he notes. “Prices are up in specific areas like centro about 10 to 20% depending on the property.”

The good buys are in upcoming neighborhoods like San Antonio, Guadalupe or Rinconada de los Balcones, according to Ortiz.  “These are nicely developing neighborhoods,” he says. Prices in these three areas are still less than what would typically be found in high-demand locales like Centro, Guadiana or Balcones.

What to Buy

Most affluent buyers are looking for ensuite bedrooms, modern and updated kitchens, and of course, the older generations “are happy to find a master bedroom on the main floor — although that feature is also very convenient for the younger generation too,” says Ortiz. He also points out that many of his international buyers tend to look for smaller places in the city center, with the plan to rent out the property.

Priced at $3,200,000, this delightful colonial villa in town offers one such opportunity. Blending historic elements with modern concepts of space (four bedrooms, to be exact) and light, the house wraps around elaborate gardens, pool and serene water fountains. The beauty of this home lies in the rich details: high ceilings, large windows, elegant chandeliers, cantera floors and antique furniture.

There is also a separate three-bedroom casita equipped with all the amenities — perfect for houseguests or a rental opportunity.

Value Proposition

“San Miguel offers a great value proposition, compared to other cities that make the top five lists of best cities in the world,” says Ortiz.  His final piece of advice?

“Come fast!” he adds. “San Miguel is a hot market that is growing quickly. The land and building prices have gone up year after year. And it is just a beautiful city. You should’t miss out.”