It’s a big step up the housing ladder, but is it worth £3.6m? As prime minister, Tony Blair has built his career on compromise, and the choice of neighbourhood for his new London home is no different. By moving into Connaught Square, close to Marble Arch, he and Cherie have sacrificed peace and quiet for location.

An influx of new money over the past five years has made this rather anonymous stretch of central London, just off Oxford Street, more chi-chi. Three years ago Madonna splashed out £7m on a vast townhouse in Great Cumberland Place, a few hundred yards away.

Neighbours include William Orbit, the music producer, and Paul Oakenfold, the house DJ, who owns the house next door to the Blairs. Others include John Outram, the architect, Andrew Balgarnie, an investment banker, and Richard Balfour-Lynn, chairman of Retail Stores, which owns Liberty, the department store.

Mixed in are the wealthy Arabs who live nearby, keen to be close to Edgware Road and its bustling halal grocery stores and cafes.

Connaught Square is less ostentatious than Knightsbridge or Belgravia but taxis use it as a shortcut, and traffic noise could keep the Blairs awake.

The fenced-off garden in the middle of the square — to which the Blairs will have access — is not as secluded as those in Notting Hill. It has been likened to a patch of grass in the middle of a car park. But Hyde Park is just across the Bayswater Road, Mayfair a short stroll away and Westminster 10 minutes by car.

David Lofthouse, a banker with a young family who rents No 28 from Oakenfold, said: “There is a community spirit here. There’s an active garden committee. If you so much as kick a ball, one of the garden police will come down on you hard.”

By night, the tentacles of crime occasionally reach in. Conor O’Brien, who lives at No 34, said: “Last month I had the wheels of my Mercedes taken. I’m guessing that sort of thing won’t happen after the Blairs move in — no doubt security will improve.”

Behind the imposing black double door of No 29, which the Blairs bought during the summer, the taste of Roger Bevan, the art historian who sold the house, is much in evidence. Touches include gothic fireplaces made from Portland stone and walls lined with purple velvet and brown, blue and yellow patterned wallpaper.

The five-storey, stucco-and-brick fronted house has five bedrooms, with a dining room and kitchen on the ground floor and a study and drawing room on the first.

The master bedroom is on the second floor, with an en suite bathroom and dressing area. There are three further bedrooms on the third floor and space for a nanny on the fourth. The basement houses an office and library, and at the back of the house is a small patio.

Lofthouse, who has visited No 29, said: “It’s a very heavy place, not a lot of light. I found it slightly oppressive.”

The Blairs are thought to have saddled themselves with a big mortgage, with repayments estimated at about £132,000 a year.

How can they afford it? As prime minister, Blair commands an annual salary of £178,922 before tax. His wife’s earnings are not public, but, because of her relatively low caseload, may be little more than £200,000 a year. By most standards, it adds up to formidable £400,000 a year.

The earning power of the Blair brand will be on show tomorrow when Cherie addresses an insurance conference in White Sulphur Springs, West Virginia, for a reported £30,000.

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