Unlucky or inept? The sad saga of the Blairs and their problem properties

For a well-connected couple with not one, but two legally trained minds at their disposal, the Blairs have been remarkably unlucky or inept in the property market. While others in their income bracket have made paper fortunes since 1997, the Blairs have missed out to the tune of at least £1m since moving into Downing Street.

For a well-connected couple with not one, but two legally trained minds at their disposal, the Blairs have been remarkably unlucky or inept in the property market. While others in their income bracket have made paper fortunes since 1997, the Blairs have missed out to the tune of at least £1m since moving into Downing Street.

The political cost has been more marked still. "Cheriegate", prompted by Mrs Blair's decision to buy two Bristol flats with the help of conman Peter Foster, was the lowest point of her time as the Prime Minister's wife, and opened the Blairs to questions about their choice of friends.

Now the Bristol flats are raising questions once again, this time about their political rather than personal allegiances. The apartments in the prestigious Panoramic development have been rented to a French defence company with more than £5bn of British Government contracts, giving the Blairs an estimated £60,000 a year in rent.

Downing Street insists the Blairs were not involved in the choice of tenants and have had no contact with them. A spokesman said last night, allegations of a conflict of interest were therefore "absurd". Significantly, however, No 10 refuses to say whether the Prime Minister knew of his tenants' identity. But the revelation has turned attention back on to the Government's relationship with the defence industry, and with Thales, France's largest electrical defence contractor.

The firm, a Labour donor in the past, has been awarded a controversial share of the £9bn contract to build two new aircraft carriers for the Navy. It also has an £800m contract to supply unmanned surveillance aircraft for the MoD and a £20m contract for high-tech infantry equipment. Its executives working on this last project who are said to have been staying in the Blair's flats. This month the company reported sales of £4.57bn on just nine months' trading.

The Blairs first fell foul of the property business with their Islington home at Richmond Crescent, a six bedroom Victorian townhouse. It was a shrewd purchase, snapped up for £375,000 in 1993 through a house-swap deal which allowed the Blairs to save on stamp duty.

Mr Blair's victory in 1997, however, brought a heavy financial price. He was told that the Islington house would be a security risk, and a source of disturbance for the neighbours, so they decided to sell.

The price, at £615,000, gave them a profit of £240,000, but the Blairs found that when the house went back on the market in May, the asking price had shot up to £1.69m - while they were off the property ladder almost entirely.

To say they were galled is an understatement, and this is said to have been a factor behind Mrs Blair's rash decision to buy the two Panoramic flats, some of the most desirable in Bristol. The flats, in the same block, were bought in January last year, partly as an investment and partly for the Blair's eldest son, Euan, who was studying at Bristol University. The purchase was made without the knowledge of Mr Blair, and even more so because it transpired that Mrs Blair had enlisted the help of Peter Foster, the Australian conman and the boyfriend of her lifestyle guru, Carole Caplin.

Mr Foster had helped her buy the flats at a knockdown rate. The furore it provoked resulted in a televised apology from Mrs Blair.

The Blair's latest and most grandiose property venture, the £3.65m purchase of 29 Connaught Square, central London, earlier this year has been construed as an attempt not just to make up for lost ground but to establish a fitting base for a high-profile, possibly international career when Mr Blair is no longer Prime Minister.

It is believed to have been purchased partly on the basis of his future earnings. But stamp duty alone came to £144,000, and now it is reported that the Blairs are still waiting for a tenant willing to pay the rent of £2,900 a week that would allow them to break even. According to some estate agents that is at least £1,000 more than the market can bear. It is not a dead loss: the man who sold them the flat, art historian Roger Bevan, is still reportedly living there while his new home is redecorated.

Labour traditionalists may smile to learn that of all the property deals, the most profitable in percentage terms has been the acquisition of a Myrobella, a detached Victorian house in the socialist mining area of Trimdon Colliery. It was bought for £30,000 when Mr Blair became the MP for Sedgefield in 1983. It is now worth £150,000.