Summer traffic delays in London do have the odd compensation - so long as you get snarled up in the right spot. Vantage points on either side of Hyde Park let you view the construction of two of the capital's high-profile luxury developments. On the southern side, in Knightsbridge, One Hyde Park is an example of the extreme opulence that the super-rich now regard as essential. To the north, in Bayswater, The Lancasters development is restoring a Grade II terrace, pictured, to its former stuccoed splendour.

The first of One Hyde Park's four towers taking shape by the junction of Knightsbridge and Brompton Road. This scheme, designed by Richard Rogers and managed by the Candy brothers, specialists in pads for potentates, has already risen to prominence thanks to speculation over the cost of living there. The largest of the 86 apartments, scheduled for completion in 2010, has already gone - for a reputed £100 million - to Qatar's foreign minister.

It may be a little easier to imagine yourself living in The Lancasters, where the accommodation will be not quite so costly. You can gaze at length on this building's 90ft-high belle époque-style white façade if there is a traffic hold-up between Queensway and Lancaster Gate on Bayswater Road, the boulevard that runs along the northern edge of Kensington Gardens and Hyde Park.

Yet even when the traffic is flowing, the screen surrounding this development will catch your eye. The rubble of construction is hidden behind a 142-yard-long row of huge coloured pencils. This piece of temporary but diverting public art was inspired by the paintings hung out for sale on the railings of Hyde Park every Sunday - though the screen has far more claim to merit than most of those.

No prices have been revealed for the 77 apartments in The Lancasters, a joint venture between Northacre and Minerva, two quoted property groups, although about a quarter have been pre-sold. One report suggests the two-bedroom flats will range from £1 million to £2 million. The penthouses will be about £35 million.

Minerva and Northacre bought the former Thistle Hotel for £67.2 million in February 2006. By then it was in a sorry state, thanks to neglect and ill-considered conversion work. In the 1970s, many original features of the 15 ambassadorial residences knocked together to form the hotel were ripped out in a process that gave London its longest hotel corridor - which was rated at the time as an architectural achievement.

John Hunter, Northacre's chief executive, looks pained as he describes this desecration. He has built his career on the revival of landmarks such as Earls Terrace, a row of Georgian homes in Kensington that was transformed from uninhabitable lodging houses into a chic address.

The hotel's poky rooms are all about to be demolished; all that will remain is the façade, supported by girders. The spacious apartments, like One Hyde Park due for completion in 2010, will be contemporary in design, finished by stonemasons and other craftsmen who are pictured about their work in The Lancasters' marketing material.

This volume showcases the development as a sophisticated destination. It passes over the building's period as a tourist stopover, and harks back to the glamour of its beginnings in the 1850s and to the lure of nearby locations such as Hyde Park, Mayfair and Park Lane. Much smaller hotels in Bayswater are also being converted back into family homes, as the neighbourhood sloughs off its associations with scuzzy corner shops and mild decay. But Bayswater is yet to be as reassuringly expensive as Chelsea and Knightsbridge.

In harsh times, the wealthy - who get as nervous about buying homes as anyone else - can feel some disquiet about an area that is still upwardly mobile. The Blair family, who live in Connaught Square, ten minutes away from The Lancasters, may call Bayswater, London W2, home, yet it remains an alien land for those more familiar with Chelsea and SW3.

But Robert Bailey, a property search agent, believes that Bayswater's renewal is sufficiently advanced to allow it to lay claim to a place among the capital's elite districts. The Lancasters can only help to secure this position once it is finished. Meanwhile, whatever the assessment of Bayswater's charms, its beautification can only improve the outlook for those just passing through.

thelancastershydepark.com

Fast facts

A studio flat in Orme Court, Bayswater, is currently for sale for £175,000 through Foxtons. The flat's area is a tiny 137 sq ft.

A one-bedroom flat in Connaught Square, home to Tony Blair and his family, is for sale for £1 million through Kinleigh Folkard & Hayward . A four-bedroom house in the square is on sale for £4.75million through Hamptons.

This area, with its shops and restaurants, is now known as Connaught Village. The police security that surrounds the Blair mansion is seen as a nuisance by some residents and as a boon by others.

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