Panasonic’s Lumix DMC-LX3 was widely regarded as one of the best compact cameras at any price. We were so impressed with it that we gave it our highly coveted Ultimate award. The company recently launched its replacement, the Lumix DMC-LX5, and we’ve been eager to see how it would compare.

One quick look at the LX5’s specifications and features confirms that, like the LX3, the new model is aimed at photography enthusiasts rather than beginners. There was little wrong with the LX3, but Panasonic hasn’t rested on its laurels and has attempted to make improvements where possible.

The LX5 has a newly designed 3.8x (24-90mm f/2.0-3.3) optical zoom Leica DC Vario-Summicron lens, an upgraded 10-megapixel sensor, a brand new processing engine and a number of interface changes designed to make the camera easier to use. It’s no surprise, then, that the Lumix DMC-LX5 is now Panasonic’s highest-specified compact camera.

At a first glance, the LX5’s body looks almost identical to the LX3 – the most visible change is the thicker hand grip that makes the camera slightly easier to hold. There are some subtle differences to the button layout, with the most noticeable being the introduction of a clickable jog dial, which replaces the Q.Menu joystick.

A consequence of this is that the small thumb grip on the LX3 is no more and your thumb now naturally rests directly on the jog dial. It makes the camera slightly less comfortable to hold, but it means it's far quicker to change camera settings.

The other major changes are the introduction of a direct movie recording button - something you're likely to use as the LX5 has great video quality. Meanwhile, the LX3’s dedicated review mode switch has been replaced with an image review button. The LX5 can record 720p HD video at 30fps using the AVCHD Lite codec with mono audio, which compares favourably to the LX3’s 720p Motion JPEG recording at 24fps with mono audio.