GUARDIAN I was warned that Madeira is no place to build sandcastles; but quite how depleted it is of sand still came as a surprise. Its intriguing primordial rawness – a result of ancient volcanic activity – is omnipresent. Toothy mountains tower dramatically above the capital of Funchal, prod clouds and alter the weather patterns on this Atlantic speck. Beaches are pebble-dashed with boulders.

Estalagem da Ponta do Sol is perched on top of a particularly craggy peak, which means you need to take an outside lift to the hotel’s reception area some 100ft above. It feels a bit James Bond on a budget – but in a good way. Cliffs shear away to the sea hundreds of feet below, large pines and palms grow off impossible edges and my crow’s-nesty bedroom hovered perilously above. It’s not for those with vertigo – and I prayed that coastal erosion wasn’t an ongoing problem.

Their chilled-out bar is an ambient marvel; terraced lawns and steps were draped with laid-back guests and Funchal’s demi-monde – or was it Demi Moore? Poncha, a local lemony tipple, was slugged back in the glutinous heat. I loved it. But not as much as the revelatory building situated 10 miles up the road.

The Centro das Artes (centrodasartes.com) is possibly the most beautiful gallery I’ve ever visited. Part fort, part bunker, part Neolithic labyrinth, it’s so absorbing that I had to visit twice; once to soak up the superb architecture and another for the show inside – currently contemporary Portuguese artists, but exhibitions change every six months. Sadly the place was empty on my visit. Perhaps it is a little too well hidden and is certainly way off the tourist radar. Yet I’d argue a trip to Madeira was almost worth it solely to visit this spectacular and innovative building – just be sure not to confuse it with the lacklustre contemporary art gallery in Funchal.

There’s something else squeaky and new about Madeira – the road system. It seems every main thoroughfare has been rebuilt, creating an infrastructure of highways and tunnels that has slashed travel times around the island; a boon if you’re heading towards Faja da Ovelha in the west of the island – a trip that used to take five hours, but now takes only one.

Turn off the motorway, though, and you’re quickly back in old Madeira. The road to Faaja da Ovelha takes you along twisting lanes lined with blue agapanthus, past layered fields filled with wheat and plum trees heavy with golden fruit. It’s easy to get distracted and miss your turn. An elderly woman baking bread at a traditional open fire by the roadside sent me the right way.

Barry and Johannes (originally from South Africa and Germany) have created a lovely guesthouse hidden up a side road in this farming community. Summer Place is intimate, urbane and quietly stylish, even though the setting is wholly rural. I found it difficult to pull away from slobbing by the black swimming pool, with its dynamite view across farm rooftops to the sea in the distance, but ventured into Faja da Ovelha on Sunday to see old ladies, some in wellies, all in headscarves, walk purposefully to church.

These pious old women cling to medieval methods of agriculture and a beguilingly slow life based on God, the land, the sea and hardship. They’ll probably be the last generation to live like this; a thousand years’ worth of subsistence farming, tradition and culture looks set to disappear as the new roads bring change and the younger generation leaves the land.

A gentle walk along the local levada (an irrigation channel cut into the hillside) takes you through these vanishing communities and into the cool shadows cast by pine and eucalyptus forests.

Hunger dictated my return to Summer Place, a cold beer and the promise of a locally sourced dinner cooked by Johannes. Homemade liver pâté, dorado with a fresh garden salad and crème brûlée featured on the changing menu; inclusive of wine, it set me back only an extra €30.

Naturally, seafood is big on the islands and Funchal spoilt me for choice – idling around the capital the following day I eventually settled on a set lunch at Celeiro, a small restaurant near the old town where fresh octopus and a glass of wine cost €10.

Just up the road from Celeiro is Madeira’s latest and possibly chicest hotel, The Vine, with a rooftop swimming pool straight out of Wallpaper*, beds the size of helipads and, of course, wine. The spa is a dipsomaniac’s dream: I soaked in a Jacuzzi filled with wine extracts, a glass of the red stuff in hand. Not quite the bath of champagne shared by Kate Moss and Johnny Depp or the 1st Duke of Clarence drowning in a butt of malmsey – I’d guess you’d call it a gentle re-tox instead.

Newly-buffed, it was time to hit town. I reckon someone bought a job lot of giant white illuminated flower pots in Madeira: I spotted them at various places around the island, including Café Teatro – a cool place to start a late evening. From there I moved down to the harbourside and the Mohle club (mohle.com), which sits on top of another ubiquitous rocky outcrop. Ignore the sign that points out a minimum spend of €250; it’s a remnant of a previous incarnation and P Diddy has yet to make the place a fixture. Entry costs a rather more modest €5, drink included. The club doesn’t get cranked up until 2am and is the perfect place to watch the sunrise.

OK, it’s not unadulterated Balearic hedonism, but it does seem that the island’s reputation for golf-club-style old-fartism is waning, and Madeira is finally starting to rock.