Manchester City will be confident of agreeing a price in the region of £25m for James Milner after the Aston Villa manager, Martin O'Neill, claimed the England midfielder wants to leave the club.

While another long-term transfer target, Wolfsburg striker Edin Dzeko, maintains he will reject City in favour of a move to Juventus, City finally received some positive news on Milner yesterday.

Villa were quick to reject City's offer of £18m plus £2m in additional payments in May but, although Milner was publicly non-committal on the subject, he also turned down the opportunity to discuss extending his contract beyond 2012.

The Midlands club were thought to be holding out for £30m but O'Neill's declaration that he expects the situation to be "resolved soon" suggests a softening in that stance.

Although City have virtually limitless cash, they are desperate to avoid being seen as an easy touch and only on Wednesday manager Roberto Mancini, who is also hoping to sign the Internazionale striker Mario Balotelli, was expressing his frustration at the prices the club were being quoted. But at least there appeared to be a breakthrough with Milner, who returns from a post-World Cup holiday next week.

"I had a conversation with James before the World Cup and he intimated that he'd like to go," O'Neill said. "City made an offer but it did not meet our valuation. I'm sure matters will be resolved soon. James is back next week having had an extended holiday. There is a difference of valuation at this moment between the clubs. That may well be resolved and if that is the case then absolutely fine.

"I think James' agent has told our chief executive that he wouldn't be signing a new contract. Obviously that puts a different slant on things, like everything else. If a fee is agreed, at the end of the day, the player can leave."

O'Neill has been told by owner Randy Lerner that he must generate his own transfer funds and therefore can not afford to show the kind of stubbornness that fought off Liverpool's interest in Gareth Barry two summers ago. He eventually sold Barry to City in May 2009 and, having accepted that Milner wants to depart, it appears O'Neill has little choice but to push a deal through to fund moves for West Ham's Scott Parker and Celtic's Aiden McGeady. He may also consider asking City to include midfielder Stephen Ireland or defender Nedum Onuoha in the Milner deal.

Ireland is expected to leave Eastlands this summer and has also been interesting Sunderland, while there are also question marks over the future of Onuoha, who was fiercely critical of Mancini in May.

With David Silva, Yaya Touré and Jérôme Boateng already recruited by Mancini at a cost of £60m, Lazio have confirmed that Serbian defender Aleksander Kolarov is on the verge of completing a £17m move to City, who play a pre-season friendly against Sporting Lisbon in New York today.

City have remained cautious on Dzeko, with Wolfsburg demanding £32m for the powerful Bosnian striker but now they look to have missed out to Juventus. The Turin club have yet to agree a fee for Dzeko but he said: "I will reject Manchester City once again if Juventus really want me."

City may have failed to even make the top four in the Premier League last season but captain Kolo Touré feels that a first title since 1968 should be the aim in the new campaign. Having won the league with Arsenal, Touré thinks the new arrivals at Eastlands mean the same is now possible with City.

"I think with all the players we have, we have to go for the title," he said. "We've bought some new players, some really, really top players. Last season was really good and now we've strengthened our team. We just need to give everything in each game."