The business - Patrick Hosking

Rocketing prices in the two districts the Blairs know best - Islington and Sedgefield - have convinc

The psychology of asset-buying is fascinating. And the decision by the Prime Minister and his wife to borrow heavily (we think) and splash out £3.6m on an unexceptional house on the wrong side of the Edgware Road is particularly intriguing.

It's not at all clear the Blairs will ever live there. They expect to be in Downing Street for the next five years. And Connaught Square - with its transient population of City types, minor celebs and high-class prostitutes - looks an unlikely retirement spot. Such is the warm sense of community that the annual residents' party in the communal garden square is organised by Cluttons, the estate agents.

So, this should have been a dispassionate, cold-blooded investment decision. The Prime Minister and his wife, perhaps with some advice from a private banker, should have coolly debated where to invest their nest egg to produce the biggest return five years hence.

After appraising the prospects for shares, gilts, hedge funds, private equity and other assets, including, yes, buy-to-let residential property, they should have settled on the appropriate asset mix.

Somehow, I don't think that's how it worked in practice. Property gets under the skin. And the Blairs are no doubt sore from their past poor luck. They sold the big family home in Islington in 1997 for £615,000, only to see it almost treble in value since then.

Then came the Bristol flats fiasco.

But why the huge bet on property now, just as the market is turning sharply downwards? House prices are already stagnant or falling in large parts of Britain. Overall, even the most optimistic forecasters say growth will slow close to zero by the end of next year. The bears are predicting falls of as much as 40 per cent over the next four years.

Lurking in the regional house-price statistics is one possible explanation. Like anyone else, the Blairs will have been influenced by the experience of their friends and neighbours. The two districts they know best are Islington in London and the constituency of Sedgefield in County Durham, where they have had a home since 1983.

Item one: Sedgefield currently has the fastest-growing house prices of any district in the country. According to the Nationwide Building Society, which assesses 434 districts in Britain from Shetland to the Isles of Scilly, Sedgefield is currently number one, with prices in the former mining district soaring by more than 40 per cent in the past year.

Item two: Islington has the fastest-growing house prices in London. Again, according to the Nationwide's latest figures, year-on-year growth is running at 20-25 per cent, faster than any of the other 30 local authority areas in the capital. It's a dramatic turnaround from a year ago, when Islington was ranked 31st out of 31 for house-price growth.

The Sedgefield boom is quite extraordinary. One estate agent there told me prices had almost doubled in the space of two years, as the town has suddenly been seized upon by commuters to Teesside, Tyneside and Durham. Islington's renaissance is also marked. Intriguingly, the American businesswoman who helped the Blairs find the Connaught Square property lives in Islington.

Perhaps rocketing prices in those two districts persuaded the Blairs that there was still money to be made in bricks and mortar and that if they were ever to step back on to a decently high rung on the property ladder, they had to act quickly.

It may turn out to be a shrewd investment. It is unlikely to be a complete disaster. But I would wager that, over the next five years, both shares and indeed an ordinary savings account will do better than residential property.

And if the property market doomsters are right, then the Connaught Square purchase will go down in financial history as one of those deliciously symbolic moments, when a famous figure piles into a market at just the wrong time - a bit like Sir Isaac Newton's decision in 1720 to invest £20,000 in the infamous South Sea Trading Company.

Gerry Robinson's new series of I'll Show Them Who's Boss is riveting television. The former Granada chief goes into struggling, small family businesses and tells them some uncomfortable truths. On the basis of the two programmes I've seen, this means bluntly informing the favoured son that he's not up to the job of taking over from his father. It is toe-curlingly cruel.

But why on earth is Robinson wasting his time with such corporate tiddlers? I can think of half a dozen blue-chips that could do with a dose of Robinson medicine. He could start with Sainsbury's, the ultimate family business - which is about to publish another trading statement, widely expected to be a stinker.

Patrick Hosking is investment editor of the Times