The yellow-sand beaches, fiery sunsets and laid-back lifestyle of Holland, Michigan have long attracted urbanites fleeing the biggest cities of the US mid-west. And now - with the country in recession, the Detroit-based automobile industry in turmoil and Chicago's businesses struggling to cope with a global financial crisis - the small city on eastern Lake Michigan and the smaller Lake Macatawa has never been more needed as a holiday retreat.

"We were looking for some place we could get away to without the pressure of a big vacation and there are so many things to do there," says David Aardema, 54, who with his wife Tammy recently bought a three-bedroom summer cottage with blue-and-white siding, a large back garden and a porch overlooking Lake Macatawa. "You can go fishing, swimming, go to the beach, out on the lake. The scenery is beautiful and, if you're from the city, it's a much slower pace. As soon as you get there, you feel like you're in a different world."

As the name would suggest, Holland was founded by Dutch settlers who arrived in 1847 seeking to be near waterways that they hoped would promote industry. From the 1890s until the Great Depression, it thrived as a resort town with the wealthy and connected of Chicago, who came on trains or boats and stayed at fancy resort hotels and cottages along its shores. One of the most prominent was The Wonderful Wizard of Oz author L. Frank Baum, who built a summer cottage in Macatawa Park, on the south side of the Holland Channel in 1902. (Local legend has it that Baum's inspiration for the Emerald City, the fictional capital of Oz, was a castle in what is now called Castle Park; it had been built by a wealthy Prussian who made his money as a Chicago tailor and then in real estate.) In more recent years, Castle Park was summer home to Donald Rumsfeld, the former US secretary of defence, who is from the Chicago suburbs.

For years, the "old Dutch ways" dominated life and, even today, the most prominent people in Holland come from Dutch stock. Richard DeVos Sr, the billionaire co-founder of Amway - now called Alticor - summers in Holland's Tunnel Park and the town is year-round home to Erik Prince, chief executive of the controversial military company Blackwater.

The Dutch population works hard to retain its links with the old country as well. There have been several visits from the Netherlands' royal family over the years; Holland has a 240-year-old working Dutch windmill that was shipped over in 1964; and, every May, the annual Tulip Time Festival celebrates the blooming of 6m local tulips with parades and a 1,200-strong Klompen dance. "A few years ago the Dutch cavalry came to perform," says Randy Vande Water, local historian and former managing editor of the Holland Sentinel newspaper. "There's a particularly strong connection with the Netherlands during the festival."

Donald Luidens, professor of sociology at Holland's Hope College, felt this when he first came to the city 30 years ago. "When I arrived the diphthong [in my name] really made a difference. I got into places that other people couldn't and was more quickly accepted into community groups," he says.

But he thinks the city has become much more welcoming to outsiders in recent years. Hispanics - many of whom were initially attracted by work on the local blueberry farms - now make up 22 per cent of the greater Holland population of 122,000, while the Dutch-American population makes up about 30 per cent - compared with about 85 per cent before the second world war. "More and more Hispanics are successful in the community economically and in terms of education," Luidens says.

Although Holland's economy has slowed in recent months, it has been sheltered from the economic problems suffered by eastern Michigan. Average unemployment in the city for the first eight months of the year was 6.6 per cent, compared with just over 8 per cent for the state. "It's partly the Dutch influence. There's a strong work ethic," says John Lunn, an economics professor at Hope College. "It is also much less unionised than the eastern part of the state and it's got a diverse economy relative to Detroit."

A handful of civic-minded entrepreneurs create stability by providing steady jobs in the car parts, office furniture and food processing industries. And there is also the Eighth Street shopping area, which was regenerated in the 1980s in response to a new mall that nearly killed local business. It is now a thriving all-American Main Street of cosy cafés, boutiques and bars.

Of course, house prices in Holland have fallen with those in the rest of the US. The average sale price of homes on Lake Michigan has fallen 32 per cent to about $1.5m year to date, while the drop on Lake Macatawa has been 22 per cent to $807,000, according to local estate agent Andrea Crossman.

She doesn't think the area has been hit as hard as others. "People hate to leave due to all its amenities," she explains. But "there are definitely some good deals to be had along the waterfront."

These include a contemporary, open-plan property with three bedrooms and Lake Michigan views listed at $924,900 and a traditional, New England-style house with three bedrooms and an enclosed wraparound porch, also on the lake, for $1.5m. Remax Lakeshore is meanwhile showing a four-bedroom home on a 1.2 acre lot with 157ft of lake frontage for $1.25m and a three-bedroom property with 1,000 sq ft of decking that is 50 steps from the beach for $1.35m.

Retirees David Boelkins, 65, and his wife Margaret, regular summer residents of Holland, decided to relocate there from Flint, Michigan in 2004, buying a three-bedroom cedar cottage with views over Lake Michigan and its own private beach. It's now estimated to be worth about $1m and their community of 117 houses is half occupied by year-round residents. "Many years ago we didn't imagine ourselves living full-time in Holland because it used to be such a narrow group of people," Boelkins says. "But it's changed and we've loved being here."

The area is cold and snowy in winter but the couple say they love the quieter months. They cross-country ski around the dunes and climb the ridges of ice - reaching up to 20ft - that are piled up by the waves of Lake Michigan.

It's a testament to Holland's appeal that the Boelkins' two daughters and their families recently moved from faraway states to settle there. "Usually it's the grandparents who move nearer the kids but in our case they came to us," Boelkins says. "They just love Holland."

.....................

Details

Andrea Crossman Realty, tel: +1 616-355 6387, www.andreacrossman.comRemax Lakeshore, tel: +1 616-494 1517, www.remax-ghmi.com