Government should emulate Hong Kong and get into the mortgage loan business to help desperate would-be homeowners, said economist and Bermuda College lecturer Craig Simmons, who also warns that families already struggling with large mortgages here face even bleaker times when the US raises interest rates.

Mr. Simmons will give a lecture entitled the Economics of Housing: Market Failure and Government Inaction next Monday night.

He said market forces in housing were out of control in Bermuda, according to international standards, while Government was doing little to help.

In the western world, house prices averaged at four to six times the annual income said Mr. Simmons, but here they are now around 17 times the average salary.

He based his figures on per capita income based on Bermuda's Gross Domestic Product.

He said: "Housing is grossly un-affordable, meaning housing finances used are inadequate."

According to Mr. Simmons, the Hong Kong government has long realised that housing prices will rise above the rate of inflation and so was prepared to back property above and beyond the private sector with loans to buyers. This had continued despite the handover from British to Chinese authorities.

He said Bermuda's Government should do the same by recognising that house prices were rising more than ten percent a year. Thus Government loans of five percent a year would be possible.

Another solution is families pooling resources to get the capital for a down payment said Mr. Simmons.

"Starter homes are going for $800,000 - it's very difficult for a couple to put together the down payment necessary."

He said 95 percent mortgages put an undue burden on the borrower. "The interest payments are exorbitant given the money required."

And there is further bad news on the horizon according to the economist.

"When the US Federal rate begins to climb the Bermuda dollar base rate will climb and with it, the mortgage rate."

He said without government intervention the current mortgage rate is the cheapest it will be for a while and is very likely to rise.

"It doesn't bode well for the next ten to 15 years."

And he said cash released from share windfalls from the sale of the Bank of Bermuda to HSBC will further inflate the housing market as investors look to put the cash into property.

"It's not good for home owners struggling to get the required down payment."

Not since Quinton Edness's housing action programme of 1983 had Government really tackled the housing problem, said Mr. Simmons.

He said that the $5 million a year programme - which funded housing renovation, built new housing for ownership and provided mortgage funds for first time owners - would be a sizeable programme in today's terms.

A measure of Bermuda's property crisis is the low level of homeownership said Mr. Simmons.

According to the Bermuda Government census, the proportion of households which are homeowners is 57 percent. He said this compared badly to other nations according to information obtained from other Government websites which had these levels:

Singapore 92 percent

Hong Kong 75 percent

New Zealand 71 percent

UK 69 percent

US 68 percent

Canada 65 percent

He said in Mauritius, where the average wage was one-twelfth of the Bermuda rate, there was 86 percent home ownership

The Economics of Housing: Market Failure and Government Inaction - a free lecture. Teleconference Room, South Hall, Bermuda College 6-8 p.m, Monday, February 23.