After missing the last boom, Tony and Cherie get back on to property ladder

Tony Blair and his wife, Cherie, have bought the Georgian property in Connaught Square with the intention of using it as a family home when he leaves No 10. While they indicated that it would be rented out until his departure, it reflects the extent to which the Blairs are planning for life after Downing Street.

For the Blairs, it is also a clear attempt to regain a foothold on the property ladder after a questionable history of dabbling in the market.

In 1993, the Blairs bought 1 Richmond Crescent, a six-bedroom, four-storey Victorian townhouse in Islington for £375,000. Cherie Blair demonstrated a shrewd eye for a deal by approaching the owners directly and organising a house swap, enabling them to save on stamp duty.

They swapped their Islington home in Stavordale Road, valued at £200,000, with the owners of the Richmond Crescent property while paying an extra £175,000 in cash.

The Blairs hosted numerous dinner parties in Richmond Crescent, and their kitchen was immortalised in a Labour Party election broadcast. On the downside, it was burgled five times in 16 months.

When Blair came to power in 1997, the family was advised not to use the house: security experts deemed it unacceptable.

The Prime Minister was cautioned against renting out the property to prevent the possibility of political embarrassment caused by leasing it to an unsuitable tenant. The warning was prompted by the case of the former Tory chancellor Norman Lamont who unknowingly let his Notting Hill flat to a callgirl by the name of Miss Whiplash.

As a result, the Blairs stepped off the property ladder after the election victory in 1997 by selling the property for £615,000. It sold within hours and made them a profit of £240,000. But it was a decision they would come to regret as they missed out almost entirely on the recent property boom.

In May this year, the house went back on the market with an asking price of £1.69m. Mrs Blair was reported to be furious at having missed out on a prime investment opportunity.

The Blairs' next property venture was equally costly, but it was a cost that was counted in political rather than financial terms. Two years ago Mrs Blair bought two flats in Bristol for £525,000, one for their son Euan to live in while attending Bristol University, the other as an investment.

The purchase prompted one of the worst months of the Prime Minister's political reign. It transpired that Mrs Blair had inadvertently enlisted the help of Peter Foster, an Australian conman and the boyfriend of her lifestyle guru, Carole Caplin. Mr Foster helped her obtain the flats at a knockdown rate.

The media furore it provoked resulted in a tearful apology from Mrs Blair ­ in her famous "superwoman" speech ­ and severe damage to her business credentials.

Perhaps the Blairs' best property investment will prove to be the modest detached house they bought in the Prime Minister's Sedgefield constituency in Co Durham.

Myrobella, a detached Victorian house in the former mining village of Trimdon, was acquired for £30,000 when Mr Blair was first elected as an MP. There is little chance that the property will help the Blairs recoup the £1m they missed out on by selling Richmond Crescent.

But it has risen fivefold in value and it appears destined to remain the least controversial property in their portfolio.

The Blair's future family home on Connaught Square is the most expensive of houses in their property portfolio by a long shot. The Georgian edifice is a four-storey, five-bedroom house with a small garden at the back. In an indication of the extent of its family-friendly capacity, the property backs on to a mews and a private nursery school that would be suitable for Leo, the youngest of the Blairs' four children.

The Blairs are fortunate that the previous owner of the house has been very careful to retain all the original Georgian features, which include an excellent wooden staircase.

The Blairs should feel comfortable among their new neighbours. Connaught Square attracts an eclectic and cosmopolitan crowd of residents ranging from politicians and writers to business entrepreneurs.

Its most infamous resident was the disgraced former minister Jonathan Aitken while the Blairs' new neighbours on the square will include an author, William Shawcross, who is thought to have become friends with them after robustly defending the Prime Minister's stance on Iraq.

Bonnie Moilleron, who moved into the square four years ago with her French entrepreneur husband, Eric, said: "The timing is very interesting because it's so close to an election, but it will be difficult for some people because he is responsible for the war with Iraq and therefore he must be a target." She added: "The Blairs will find it very easy around here. All that will be expected of them will be to make a contribution to the maintenance of the garden in the square."

Greg Lofthouse, 16, a student and Blair's prospective next-door neighbour, was less impressed: "It will probably bring down the house prices although it might improve the security."

The Blairs may be pleased to learn, however, that they have already been offered a free welcome meal from Colbeh, the local Iranian restaurant.

Massoud Gazeranchi, the proprietor, said: "We welcome the Blairs to the square and offer them and all the family a free meal.''

He added: "This is a very nice area with lots of designers and gallery owners and I hope the Blairs will fit in. There are all kinds of people living around the square."

GEORGIAN SPLENDOUR IN A MULTICULTURAL AREA

Connaught Square, with its four-storey brick houses, is a fine example of London's grand Georgian architecture. Planned in the early part of the 19th century, the first of the square's terraced houses was built in 1828 as part of the imposing Hyde Park estate.

Lying to the west of the Edgware Road, the square has 45 large houses, built in the classically flat-fronted Georgian style and owned by a mix of wealthy artists and business people attracted by its central location.

The area is deeply multi-cultural and particularly popular with London's Arab community centred on the Edgware Road with its many Middle Eastern restaurants.

Neighbours say the square is very "incestuous" with everybody knowing each other's business.

Madonna is known to have considered buying here but pulled out at the last moment.

Terry Kirby and Robert Verkaik