The Blairs are buying: time to sell
Dec 12, 2005
There’s good news for those praying for a property price crash: Tony and Cherie Blair have just bought a house, and for the last decade they have been one of the best contrary indicators of the market around. Cherie may have been pretty shrewd when she picked up their last house in Islington for just £375,000 after arranging a swap with the previous owners, saving them the stamp duty and estate agent fees. But her decision to then sell it for £615,000 in 1997 when a well-flagged housing market boom was just getting under way was disastrous. The house was back on the market in May, with an asking price of £1.69m. Cherie was reported to be furious at having missed out on a cool £1m.
Her next dabble in the market was just as poorly timed. Indeed, her purchase of two luxury flats in Bristol for £525,000 seems to have marked the absolute top of the boom in buying new-build two-bedroom flats for letting in urban centres. Now the Blairs are selling, but once the stamp duty and estate agent fees are considered, local agents say they will be looking at a loss of £50,000.
The Blair’s latest deal - the purchase of an unexceptional Bayswater townhouse for an amazing £3.6m - looks like it might not bring them much joy either. Basically, says Robert Peston in The Sunday Telegraph, they are “taking a punt on the market, and a pretty hefty one at that” at a time when the combined forces of the IMF, the Bank of England and much of the City are predicting an imminent price slide. The best thing to be said for the deal is that it shows a touching faith in the Treasury’s analysis that fears of a property crash are overdone. But in truth, the Blairs are swimming against the tide. This week, one of the City’s best-performing fund managers, Neil Woodford, was predicting a “healthy correction” in house prices, leading to a 30-40% slide over the next four years. This would take the average house price in the UK down from £153,700 to a mere £92,200. It would knock as much as £1.4m off the Blair’s new house.
No wonder the previous owners of the Connaught Square house, the Bevans, “hardly believed their luck” when the Blairs offered £3.6m for it in June, says Ross Clark in The Sunday Telegraph. The house has been on and off the market since 2000, when it was priced at £3.5m, and until now had failed to find a buyer. Connaught Square, with its smart-looking brick houses, has its advantages: it’s close to Hyde Park, with easy access to Westminster and the West End. But it’s a comparatively soulless area, wedged between two thundering, main arterial roads, says Clark. There’s no garden to speak of, and the house is dark and narrow. For that kind of money, the Blairs would have done better to have bought a more secluded property, with a garden, somewhere like Holland Park.
Ominously, for the would-be buy-to-let Blairs, the house hasn’t proved a rental winner either: the consensus among local agents is that they would be lucky to achieve £2,000 a week. That would leave a “measly” gross rental yield of 2.7%; not nearly enough to pay the mortgage, even before you include management charges and maintenance costs. In fact, it would leave the Blairs with a loss of around £30,000 a year. However, on the plus side, unlike many suffering buy-to-let investors, at least the Blairs can afford the loss. Both are high-earners anyway, and Cherie is hoping to earn up to £100,000 from sales of her book, The Goldfish Bowl, plus a further £90,000 from lectures in the US next month. Meanwhile, Tony can expect to cash in when he steps down, publishes his memoirs and becomes a fixture on the US lecture circuit.
