A legal challenge to a new policy prohibiting the sale of Bermudian-owned properties to foreigners has stalled because of lack of interest.

Mark Diel, a partner in legal firm Marshall Diel & Myers, said his firm began the preliminary work for a legal challenge, after it was determined the policy was susceptible to contest, but there has not been enough interest to sustain it.

?We were expecting people would want to challenge it,? he said yesterday. ?It doesn?t seem to be upsetting people to the extent we thought it would.?

The policy, put in place by Government earlier this year, prevented Bermudian owners of property with annual rental values of $153,000 from selling to non-Bermudians.

Properties with an annual rental value below that value ? except for some condominium developments ? have not been available for sale to non-Bermudians for decades.

A buoyant local real estate market may be one reason why there was less support of a recourse to legal means than was originally expected, but one realtor said the policy will impact the local market in the long run.

?The international sector is doing well, and Bermudians are starting to benefit,? said the realtor, who asked not to be named.

He said the buoyant market meant the short-term impact of the new policy had been negligible.

?If you have a home under $5 million you can probably find a buyer, in this market, among Bermudians,? he said.

However, he said the long-term picture was less certain, especially if the economy began to flounder.

?If the economy shifts we have to rely on the international marketplace, like we had to ten years ago,? for buyers of pricier properties, he said.

Government gave no warning before putting the policy into place on February 9, because it said it did not want to tip off any Bermudian thinking of ?fronting? a sale to a foreigner.

Government has said the new policy, put in place for at least five years as a stop-gap measure, is designed to slow the rate of property sales to foreigners. It is not clear if the policy could be repealed after five years, or continue in some fashion.

?Over the years, more and more land has gradually been sold away to non-Bermudians,? said Home Affairs Minister Randy Horton in March. ?It is time to turn off the tap.?

Government said it also put the policy in place to prevent Bermudians from ?fronting? sales of property to foreigners, after unsuccessfully trying to prosecute alleged offenders.

Some expatriates have been suspected of using Bermudians to ?front? property purchases as a way to avoid a property tax only levied on foreigners. Foreigners buying a property in Bermuda are, by law, only able to buy real estate valued at the high end of the market (the property must have an annual rental value of $153,000 or up), and also have to pay a 22 percent property purchase tax, often referred to as the ?alien license?.

Critics of the policy have said it discriminates against Bermudians who now can only sell properties to Bermudians, and some realtors have said it had the effect of dampening sales, including some all-but-agreed real estate deals falling through.

The new policy only bears on Bermudians who own property privately, not Bermudian developers who can, under certain conditions, seek special permission to sell to foreigners.

That has raised concerns that the policy will serve to encourage increased development of luxury condominium projects geared for sale to wealthy foreign buyers.

The realtor who spoke with also cautioned that the policy could drive away the high-net worth individuals Bermuda typically tries to attract.

He said this type of person is looking for a large estate home, but the supply for this bracket of real estate was halved by the new policy.

?If you had the money on February 8, flew into Bermuda, and said I want the Bermuda lifestyle, there were 20 homes we could show you,? he said.

The next day, with the new policy quietly ushered in, there were only nine of this type of home available to outside buyers, he said.

?Government wants to have the alien licence revenue, but you have to have the supply.?