In short, many column inches are taken up with the fascination of Tony and Cherie Blair and their STG 5 million five property portfolio. As Tony Blair was Prime Minister for ten years, it made me think - what has happened to the property market during the Blair years (compared to other investment, such as the stock market)?

When Tony Blair walked into Downing Street in May 1997, what should everybody have done with their money that day? With 20-20 vision of hindsight, there is a clear answer to that. They should have got all their available cash together and put down a deposit on one (or more) of the newfangled buy-to-let mortgages emerging at the time.

Since 2nd May 1997, if you compare property to shares for example, anyone tracking the FTSE 100 index has endured a roller-coaster ride. Starting at 4,445, the blue-chip index rose in less than three years to its all-time high of 6,930 before losing more than half its value by March 2003, when it bottomed out at 3,287. Four years later, still 400 points shy of its previous peak, it stands just 47 per cent higher than when Labour came to power. That´s a pretty miserable return. Even with dividend income reinvested you would only have doubled your money in 10 years, a compound annual return of just 7 per cent. With the retail prices index running at more than 4 per cent, investments have made little progress in inflation-adjusted terms.

According to financial experts, Britain´s is the eighth worst-performing of the world´s 50 largest stock markets since 1997. European and US shares have risen much faster - by about 150 per cent on the continent and more than 100 per cent in America.

The reality for most stock market investors is almost certainly even worse. Human nature being what it is, many investors will have been tempted into the market as the dotcom bubble inflated in 1999 only to sell out after it burst. With fingers smouldering, they will then have missed the early months, years even, of the recovery.

Over the past 10 years, by contrast, house prices have soared. In May 1997, the average house in Britain cost STG 74,000. By May this year its value had risen to STG 220,000, a three-fold increase for the UK and currently the average value in London is STG 313,000. If you borrowed three quarters of the cost of that average house in 1997, covering your mortgage with your tenants´ rent, you would have turned the STG 18,500 deposit into an equity share worth STG 164,500, a nine-fold return on your original investment. That would almost certainly have outstripped most stock market returns over the same period, even if you had picked winners from the FTSE 250 index, which has risen almost in line with house prices from 4,500 a decade ago to about 11,500 today.

Part of the blame for the stock market´s relatively poor performance can be laid at the door of the Government. Most importantly, the 1997 decision to abolish the STG 5 billion a year tax credit on dividends hammered the performance of pension funds and prompted a significant, and inevitably mistimed, shift out of equities into bonds.

You can also point the finger of blame at Blair and Brown for the creation of an increasingly uncompetitive, over-regulated and over-taxed wealth-generating sector. The British Chambers of Commerce has put a price tag on the new regulations imposed since 1998 of STG 55 billion, a massive amount that might have been invested in more productive activities.

Back to house prices and a more detailed look at what has happened since Tony Blair became Prime Minister. House prices have risen by 170 per cent under the Labour government with Northern Ireland showing the largest growth of 240 per cent compared to Scotland which has shown a ‘mere’ 140 per cent increase. The cost of becoming a home purchaser is more than three times as much as when the Labour Government came to power. A first time buyer couple will now have to save up to the equivalent of 75.9 per cent of joint take home pay, to build up the STG 30,973 needed for up front buying costs on a typical home, deposit and stamp duty.

One reason for the increase in prices can be attributed to the lack of supply. The total shortfall in house building in Great Britain, between 1998 and 2006 is 313,000 with the current builds per year remaining well below the 209,000 needed every year just to keep up with the Government’s estimates for household growth up to 2026.

In May 1997, stocks were coming to the end of a prolonged bull run while house prices were only just emerging from a major slump. In conclusion, certainly the Blair years have been very kind to the property market. Tony Blair and his government policies have had a direct impact on the buoyant market. Certainly, Tony and Cherie Blair seem to be benefiting very well from the rising property market with their Connaught Street property increasing in value by STG 1 – STG 1.5 million since it was purchased in October 2004. It could possibly be said that Mr Blair had very astute foresight to invest heavily in the property market at that time.


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