Another letter this week to spark things off.

"We have a gentrified cottage in Paget, fortunately without mortgage, and we're in the early stages of my second retirement," a reader wrote. "Is there much danger of house prices here dropping appreciably over the next five to 10 years, or do you see continued appreciation? Would you think a home here would retain value as well as or better than a home in Canada or the US?"

This is one of the most emotive topics in the Bermuda debate spectrum. I will offer you my views, but that's all they are. You might feel quite differently.

There are circumstances, which we may discount for these purposes, in which Bermuda houses would lose all their value in a split second: the giant tidal wave that inundates the Island, as forecast by geologists and then-Premier Smith's karmic advisor a few years back, or a dirty bomb in Hamilton, say. On a slower basis, a Jamaica-style economic decline chaos would greatly reduce house prices over a longer period.

No sane person expects any of that to happen soon in Bermuda, so other than nodding to those possibilities, we'll ignore them.

Bermuda has a limited land mass and an economic model that calls for a growing population, whether locals returning home for their piece of the rock or expatriates brought in to do the jobs for which there is a shortage of Bermudians. Those factors alone suggest that housing prices in Bermuda will not fall in the foreseeable future. There is nothing on the horizon that I can see to change that, other than a political misstep that could sour international business on Bermuda.

You'll probably laugh when you read this, but Bermuda is not that much more expensive than the places it competes with. The average cost of a Bermuda home may be above a million dollars, but it is equally high, or higher, in London and New York. Trust me, I've been looking. The cost of living in Bermuda is, give or take, in line with that of major world capitals. Many US housing markets are taking a beating, but the falls have been most dramatic at the lower end. Outside the US, no one thinks that a major slide in house prices is likely (other than sensationalist newspapers short of news), although a slowdown in the rate at which prices have been increasing is possible. Given Bermudians' penchant for waiting until they get their asking price also tends to suggest that prices will not slip here any time soon.

Would a home in Bermuda retain its value as well as homes in London or Washington or Tokyo might? My guess is that it would. Housing markets in the US tend to rise and fall faster than is the case in Bermuda. Falls are magnified by such decisions as lending money at below-prime rates to encourage the less well-off to join the home ownership class, a criminal activity that Bermuda does not conduct.

(By way of explanation: people who could not afford to buy homes were offered fixed-rate mortgages, to entice them to enter the homeowners' market. When the fixed-rate period ended, prices had spiked, and many who had borrowed in this fashion were unable to meet their responsibilities, and so lost their homes. While life is all about 'buyer beware', the 'institutions' that sold these loans are, in my mind, equally guilty, since the current difficulties were not hard for the disinterested observer to forecast.)

I am not very familiar with the Canadian market, but do know that the same rules apply there that are in force in Bermuda or anywhere else. Home ownership is the single largest financial commitment most people make anywhere in the world, and almost always the best financial decision they ever make. If values fall, the homeowner can ride it out by simply living in the house. For decades, not many people thought of their home as a commodity - like stocks, bonds or gold - because the primary function of a home is shelter, not profit.

The focus on making a windfall from one's home is a relatively recent development, and a poor one. You buy a home to have somewhere to live. If it happens to increase in value, good luck to you or your children. If not, you still have the use of it and the ability to create from it a meaningful environment in which people can grow and live their lives. Think back over your life: how important were the homes in which you lived?

Both Canada and the US have policies of encouraging immigration. That, and the natural increase of populations through improved medicine and better living, means that house prices in popular locations rarely go down. They can, and sometimes they do, but not very often, not very far down, and not for very long.

My correspondent, as a twice-retired person, is presumably looking to maximise the value of his estate for his children, a noble and worthy cause. I doubt he has much to worry about over the five- to 10-year view. Homes in other countries often bring tax complications that can seriously reduce the value of estates, whereas Bermuda is much kinder to capital appreciation and inter-generational wealth transfer.

If you have a different view, share it with the rest of us by e-mailing crombie@northrock.bm.

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Roger Crombie is a Fellow of the Institute of Chartered Accountants in England and Wales.