THE sudden Government announcement last week which foreclosed the ability of Bermudians to sell certain real estate to non-Bermudians landed like a bombshell, and there are not many Bermudians who don't have strong feelings about the decision.

A number of letters, some enthusiastically supportive of the Government's action, and others angrily negative, appeared in the local press and the Government's bold was a major subject of debate around office water coolers and in Hamilton restaurants and bars.

Realtors and their many Bermudian clients who have invested heavily in property were in a state of shock and anger; a real estate market whose prices had soared irrepressibly upwards in recent years was being roiled not by some exogenous shock ? a sudden lurch in interest rates or a political or economic assault on the international sector ? but by a Governmental decree which was said to have been carefully debated and considered in the corridors of power.

The Real Estate Division of the Bermuda Chamber of Commerce wrote a lengthy and very diplomatic letter to Government which expressed "wholehearted support" for the main objectives of Government policy: preventing non-Bermudians from acquiring control of properties by fraudulent means, increasing land ownership by Bermudians, and addressing the current housing crisis by increasing availability of properties or by reducing the cost.

However, the realtors argued that the "prior policy addressed these concerns effectively" and expressed great concern that the new policy would have "unintended damaging consequences", the most obvious and costly of which was that "the value of Bermudian-owned real estate is significantly depreciated while the value of non-Bermudian owned real estate has appreciated".

By Government fiat, "Bermudians cannot now aspire to benefit from investing in high-end real estate or in any condominium, while foreign owners may." Further, in determining that only non-Bermudians can sell to non-Bermudians, Bermuda's balance of payments would no longer benefit from "the millions of dollars that could have been injected into our economy by way of the sale of Bermudian-owned real estate to foreign buyers", and the realtors predicted that, by "drastically reducing the already limited number of properties available to non-Bermudians, Government is eliminating their opportunity to generate revenue at the highest end of the non-Bermudian market".

Realtors who spoke to the on condition of anonymity generally expressed some anxiety, given the importance of residential construction to the economy and the weight of local investment in real estate, about the prospect of a "domino effect" throughout the economy rather than specific concerns about the fall-out in the real estate sector.

"I don't think that we agents will be affected negatively," said one realtor. "I think there's a misperception on the part of some of the public, who think of us as part of the problem. Our job is to introduce people who want to buy or sell, to facilitate the transaction, and present the outcome to the relevant attorneys."

In their letter to Government, the realtors noted that there had been "a continuing increase in the proportion of properties 'available to overseas purchasers' being bought by bona fide Bermudian purchasers. In 2004, approximately 70 per cent of all sales of 'available' properties (condos and houses) were to Bermudian buyers; this has been an increasing trend since the '90s."

A number of realtors took umbrage at the idea that they knew what the Government was planning, but did not share that knowledge with clients.

"A lot of us knew that the Government was looking at the trust/fronting situation," said one, "because they had already taken somebody to court, but we had no idea that this change was in the works, and their own story that we has been undercut by the people who have since said that the change had to be kept secret and announced suddenly, so that the market would not be alerted."

All of the realtors who talked to the were certain that Government had overreacted, because they had seen little evidence of trust-fronted foreign buyers for a number of years. Their take on the situation was that competition from other jurisdictions, a considerable increase in the prices of high-end properties, and the consequently greater effect of the 22 per cent tax on non-Bermudian property acquisitions had led to a dramatic reduction in foreign interest in Bermuda real estate.

, low US dollar interest rates, which made larger mortgages more affordable and made it more profitable for banks to encourage local borrowing, the willingness of the banks to lend up to 90 per cent of the purchase price of local property, additional liquidity produced by the sale of the Bank of Bermuda to HSBC, confidence in the long-term presence of international sector executives able to pay high rentals, and the natural attraction of Bermuda real estate to local buyers, all helped to fuel soaring local enthusiasm for "a piece of the rock".

"The great irony here," said a veteran realtor, "is that a Bermudian who owned a $5 million home and had been able to sell it to a non-Bermudian would have brought in US$5 million to the local economy and produced over US$1 million in tax to Government.

"Now he owns a house for which there is no local market at that level, Government loses out on the tax, and perhaps the local value is BD$3 million. Who does that help? There's quite a significant loss of 'wealth effect' when you add up all of those properties."

One realtor saw a silver lining to this cloud: if resident non-Bermudians were less able, by restriction, or less willing, by uncertainty, to acquire property here, they would remain in the rental market, and help underpin the local market.

"What we will see," she said, "is an Increase in tenancy offsetting a decrease in ownership, which will increase the investment value of properties for Bermudians. The real estate market is a continuum, and restrictions in one sphere should have an equal and opposite effect in another area.

"The 'trickle-down' effect will not happen, in the sense that lower-end properties will suddenly get cheaper, because there's been no effect on aggregate demand; there's still more people looking for roofs over their heads than there are roofs.

"But, as of last Thursday, wealthy Bermudians, and there are a lot of them, will not be investing new money in the real estate market on this island, which has always been a repository of Bermudian wealth."

However, many Bermudians who spoke to the and whohave been unable to afford to buy property, believed that local realtors and their wealthier clientele were most adversely affected by the Government action, and they were supportive of any move by Government which might have the effect of lowering prices. A Bermudian wrote a letter to the editor of which was similar in tone to a number of others.

"Good for you, Randy Horton," she wrote. "There haven't been many things I've agreed on with the PLP, but the new housing regulations are just what Bermuda needs. Of course, the realtors are up in arms . . . poor things won't be able to make six figures on every house they sell . . . but all good things come to an end.

"I'm a white Bermudian who has been looking to buy a house for three years. My husband and I make very decent salaries, and yet we can't find anything we can afford. I can only imagine how difficult a time people who make half of what we do are having ? there's no hope for them."

It would appear, from a small and unscientific sample, that the divide is clear and predictable: those who own the single property they live in are conflicted ? they don't want their property to lose value but know that younger and poorer people may never have the opportunity they had to get a foot on even the lower rungs of the property ladder; the relatively few who have multiple properties are unhappy that their higher-end investment properties may have been slashed in value, and the thousands without property are happy for any effort that may have the effect of lowering prices to the point where they can afford to buy.

A young Bermudian trust professional fits the first category; she and her husband own their home, but they were fully behind efforts to preserve as much land and property as possible for Bermudians.

"This recent boom has made property like gold now," she said. "We're not making more land, and we have got to get control of the situation. Foreigners can buy property anywhere they want in the whole world, but Bermudians should have the ability to afford to live here. I feel really sorry for younger people just starting out ? how can they possibly afford $1 million for a place to live? It's going to cause social problems, and the Government needs to do more."

young Bermudian professional, recently married to a non-Bermudian, hoped that prices would drop at the lower end, but wasn't optimistic. "I have only been home from college two years, and there is no way that I could get on the ladder without help from my family, which they can't afford to do right now," he said. "I am renting, and that takes a lot of our combined income. I hope this Government move helps hold prices where they are, at least, but how did they get to this level?

"People don't seem to focus on the fact that we all have to pay more rent to pay off the bank. If someone borrows $500,000 to buy a condo, they need at least $3,000 a month in rent just to pay the interest on the mortgage, and obviously they'll need $6,000 a month just to pay the interest on a $1,000,000 condo or house. I must say that my wife and I talk a lot about leaving; we're effectively priced out of my own country."

A middle-aged Bermudian, a senior executive in the international sector, was pleased that he had held off investing in the local real estate market.

"I am glad I'm not in (the market) today, and (the Government action) has completely destroyed any chance of me buying here. I had said to my wife that I would only buy somewhere like Tucker's Point, because if the local economy went south, we might always be able to sell to a foreign buyer. When the Bahamas went to the dogs, you could still sell property at Lyford Cay.

"The problem with Bermuda is that even property priced in the middle has been completely inaccessible to anyone with any sense. And part of the problem is that otherwise intelligent people cannot be talked out of putting all of their investment eggs in one basket, this very expensive real estate market.

"This (Government action) should just be a start, and I wish they had thought of more, but perhaps this is all they can conceive of today.

"We have sold this place out from underneath us over the years, but the vast majority of Bermudians don't have the brains to invest in anything else."