How to make a palace out of a shoebox

Small can be beautiful with a bit of thoughtful design, and in the process your home can be made to feel more spacious. With property prices rising and the housing stock dwindling, there is every incentive to make the best use of the space you can afford.

Whereas first-time buyers once set their sights on a decent-sized one-bedroom flat, nowadays many have to make do with a cramped studio. But a creative approach can do remarkable things with the smallest of spaces. Don't let size alone put you off.

Broadly there are two approaches to improving a space: visually, including the use of light and colour; and a more structural approach which can range from eliminating wasted space by using the most ergonomic furniture and fittings, to major works to adopt unused space in imaginative ways.

Rule one is that the more light you let in, the roomier the appearance. Think about widening or increasing the size of windows, or even creating new windows or skylights. Careful use of artificial lighting is vital. Small, discrete spotlights used with a dimmer switch can create a more atmospheric feel, with pools of light and dark. Darker spaces lend the illusion of space where there is none.

Choosing light colours for walls and ceilings also lends a feeling of space. Darker colours can make a room seem more cramped but don't write them off completely - they're effective at creating atmosphere when used in small quantities.

Floor coverings are important. Architect Alex Allardyce of London-based Odedina & Allardyce recommends that floor coverings be uniform. "Try and avoid patterns and, again, lighter colours are better." Clean, stripped wooden floorboards with a few rugs thrown around are a popular solution.

Window-boxes can be useful. Use these in combination with plants inside the building, grouped around the window-sill, to create an illusion of the outdoors coming in. This breaks up the boundary between interior and exterior.

Choice and use of furniture are vital. There is now a range of products (at a range of prices) especially designed to compensate for a small living space. Whenever you buy an item of furniture or a household appliance, always ask yourself whether the same product is available in a smaller size.

Use furniture which can double up as storage space. Your bed can have drawers underneath it, or you could opt for a fold-away. If you do, make sure you test it properly before you buy it - sofa-beds can be notoriously uncomfortable to sleep on. Don't bother with guest beds; just keep a couple of futons stored away.

High ceilings are a blessing - they provide additional opportunities to maximise space. Instead of having bookcases spread around, have one which reaches the ceiling with a stowaway ladder for access to the top shelves. The same principle applies in a kitchen with high ceilings; install storage units from the top down. Obviously put the least frequently used items of kitchenware in the top cupboards.

Miniaturised versions of kitchen fittings, including cooker, freezer, and fridge, are now readily available. If you can afford it, Stemmer and Sharp produces an oak cabinet with sliding doors, which houses a complete stainless steel kitchen, designed by architect Gil Brissa. The price, including all appliances, extractor, installation and plumbing is pounds 11,000 (tel: 0171-837 7891). And don't worry about the money having been wasted if you move on - you can take it with you.

There are cheaper versions on the same theme available. The Fucina kitchen unit costs just under pounds 3,000. Measuring 180cm wide by 64.5cm deep and 197cm high, it is constructed on a metallic-grey painted steel base, with a worktop, round basin, electric stove, tubular aluminium hanging frame with extractor hood, plate and storage racks, and a refrigerator space (tel: 0171-278 8456). If that still sounds like too much money, the Micro Kitchen costs only pounds 595. It is 60cm wide, 60cm deep and 90cm high, and incorporates a fridge, single electric hotplate, stainless steel sink top and storage drawer. It is available from John Strand (tel: 0181-749 3915).

Finally, consider what you require from your kitchen. Are you the sort of person who relies on microwaved meals from Marks & Spencer, or do you prefer cooking for yourself? If you are an M&S person, that suggests your microwave should take priority in your kitchen and you can probably get away with just a small cooker, tucked away, in addition to this.

There are plenty of ways to save space in the bathroom. Shower units have been an alternative to baths for a long time and are an obvious solution, but for those who like a good soak there are also mini-baths available at major stockists.

Storage space is usually at a premium in a small property. There are lots of ways in which you can increase it. If you have space underneath a staircase, think carefully about how you can use it best. You may be able to seal it off, or have custom-fitted cupboards installed. Think about storage devices you can install to maximise the space you already have. Industrial hanging units for garages, with rows of plastic boxes, are a good way to store tools, and bits and pieces, for example. That way the household junk that usually finds its way into spaces like this can be left undisturbed.

Finally, there are the more extreme developments, major structural alterations. If there is a staircase in the property, for example, you could think about using the space above it as an office. This may sound unconventional but Alex Allardyce says that this can be a good solution. A desk, additional steps, some shelves, and seating can all be installed, with proper support.

If you have one, a loft offers one of the most effective ways to create extra space. We will return to this subject in a series soon.

An architect's advice can be useful for major changes but many of these suggestions require no more than a sharp eye and a willingness to be inventive. When it comes to buying a small property, look for high ceilings and other structural characteristics that will help. Bear in mind all the tips given and learn to see how you could make more space within each property you view. That way, you might just get a little bargain.