Tony and Cherie bought the Connaught Square house last September for £3.65m. Not a great time to buy. Apparently the capital value has already skidded down by £150,000.
Even more annoying, there appeared to be a dearth of tenants willing to live in the prestigious house now owned by the First Family. It first arrived on the lettings market at a premium price of £3,900 per week. After a lot of interest from the press and precisely zero interest from anybody remotely resembling a tenant, this was reduced in December to £2,950. Cutting nearly a grand from the rental didn’t fool anybody and the house remained empty.
“It was overpriced,” says Mary Hennigan-Lawson from Cluttons’ West End office. She has just placed tenants in a similar house in the square who are paying £1,700 per week. “And that has a roof terrace, while the Blairs’ has no open space. The one we’ve let is very contemporary. Minimalist, with lots of space.
“Whereas,” she says in a discreet tone, “the Blairs’ house needs work. If the rumours are right and it has gone, I bet that is on condition that it has refurbishment done prior to the tenant moving in. I took a client around it, and it’s very chintzy. My people didn’t have time to wait for redecorations.”
Corporate tenants don’t like hanging around for the wallpaper hanger. Makes them feel very unspecial, which is not a good feeling when you are contemplating shelling out two grand a week for your house.
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“Another client has spent about £500,000 refurbishing another house on the square,” says Hennigan-Lawson. “It’s minimalist and therefore very in line with the rental market. It’s on with us for £2,450 per week. I think we will get £2,200 per week for it.”
Putting granite kitchen tops to one side for a moment, surely people will be attracted by the idea of living in a house belonging to the PM? Bathing in the same bathroom as he will one day use, cooking in the same kitchen, gazing out at the view as one day he might gaze while writing his memoirs, etc? Hennigan-Lawson doesn’t have time for this sort of twaddle. “Everybody asks whether this is the Blairs’ house; we are very discreet, but of course they all know it is. Are they impressed? Not particularly.”
Another estate agent is less polite. “They don’t care,” he says. “It is not a decider.” But interior decoration is. “It is so dated,” says my informer. “To get £2,000 per week, the kitchen needs to be replaced. The bathroom is marbly. All the bathrooms are, in fact.”
Caroline Pugh, head of lettings at Friend & Falcke, is even more direct. “It’s all swags and tails!” she cries. “Full of 1980s ostentation. The bathrooms need to be limestone, not marble, and the floors need to be stripped wood.”
And if the inside is wrong, the outside is even more disastrous. Connaught Square lacks what Pugh calls “kerb appeal”. A phrase coined by visiting American bankers, it’s all about whether the postcode swings. SW1 does, SW3 does. W2 does not swing.
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Barry Manners from Chard estate agency concurs. “It’s a little bit off-message for corporate relocating tenants,” he says. “And those are the people who will be renting this house. For anything over £1,500 per week, the only market is US investment bankers. Who would much rather be down in South Ken or Chelsea. It’s a popular holiday spot for tourists from the Middle East, which is great if you are from Dubai, but it’s not really a corporate rental zone.
“It is niche, and renting over the summer holidays is not what underpins the market. Blair basically bought off-message.”
Which is a pretty hilarious thing for somebody so permanently on-message.
“The Hyde Park estate is full of a lot of dish-dash,” says Manners. Sorry? “You know, hookers, that sort of thing.” Oh, great. “It’s not to the taste of most American bankers. As investment, I don’t get it.”
Poor old Blair. Perhaps he should have had a Granita-type chat with lettings maestro Ronnie Green from John D Wood before jumping into hooker-land in Hyde Park. “Blair will never see a reasonable yield out of it, because its original buying cost was so high,” says Green.
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“I don’t know what it has finally been let for, but at a price of £3.65m, to cover even the interest, assuming the whole thing was mortgaged, he would need a rent of about £4,000 per week. Even if he has hardly any mortgage, he would still want a return on the equity. Let’s say he is 60% geared (ie, the mortgage covers 60% of the buying cost), and has rented it for £2,500 per week. Which is about £130,000 per year. Take off agency fees and Vat, and you will be left with about £114,000 per year. Which is about £9,000 a month. But his mortgage cost is £11,000 per month, meaning a shortfall of £2,000. This is not a tragedy, as long as he is seeing capital growth. But how quickly is he going to be seeing that?” Indeed, Mr Green. It’s the million-dollar question. Or the £3.65m question, to be more accurate. “I estimate 2009 will be the beginning of the next property peak, ending in about 2014.”
Tony, if you’re out there, here’s what you should have done. “Buy 15 one-bedders in Fulham,” says Barry Manners. “Next time, Tony, I’d do that, mate.”