Crowds, unfamiliar smells and traffic dodging are unnerving facts of life for wide-eyed visitors to Hong Kong, but not in PoHo, a tranquil neighbourhood that's creating a lot of buzz.

PoHo, so-named for the area around Po Hing Fong, is nestled in Sheung Wan District, one of the earliest British settlements on Hong Kong Island. Though not far from the hectic entertainment hub around Hollywood Road and SoHo, PoHo feels like a different world.

Pedestrians make their way up and down steep sets of stairs and along narrow sidewalks beside quiet streets. Blake Garden, widely believed to be Hong Kong's first public park, is an urban oasis in the summer heat, although it belies its beginning as the centre of one of the most disastrous calamities to have hit Hong Kong. In 1894 the bubonic plague broke out here, when it was still a densely populated, heavily built and unsanitary area.

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Today, PoHo feels residential – and clean – but it's also home to an increasing number of retailers catering to almost any interest and, of course, places to eat and drink.

Many businesses are owned by expats with a hip, modernist sense of style. Yet between Po's Atelier (a bakery on Po Hing Fong) and Lampe Berger (a Paris-based perfumery on Pound Lane) you'll still see shirtless Chinese men in stalls hammering away metals and otherwise tending to their wares.

Andreas Aigner, who is originally from Austria, opened Café Loisl here in 2010. Back then, a hairdresser was among the few other businesses on the tucked-away block.

"When we opened, people told us we were crazy," Aigner says.

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Instead, he and his wife, Sirkka, have been kept busy – busier still with a new baby – serving Vienna-style iced coffee as well as breakfast, lunch and pastries to the locals who file in.

In spring, the area bursts into life with PoHo Bazaar. The street festival is the brainchild of Maximilian von Poelnitz, who in 2011 opened Secret Ingredient on Tai Ping Shan Street to deliver fresh ingredients to Poho residents. Von Poelnitz, who hails from Germany, said Hong Kong officials didn't make things easy.

"We were refused a licence, but I decided to throw the event anyway. We want to build a better understanding around city life. The government needs to co-operate with neighbourhoods to give people a better balance."

The inaugural party, held in 2012, attracted 700 people. This past June, the number swelled to 1,500.

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Unfortunately, all the hype comes with a downside.

Alexis Holm, co-owner of accessories-shop squarestreet, said his rent has nearly doubled in the past three years – and it looks poised to jump again as the area undergoes further gentrification.

But the Swedish native is willing to pay the price to be part of a cool neighbourhood. What can't he stand? The catchy PoHo handle.

"Just don't call it that," Holm says.