Former Premier Sir John Swan said the average price of a stand-alone house last year ? $1.6 million according to one realtor ? is a distortion of the true state of the market.

He warned that sellers might be tempted to ask more for their homes than they were worth since the publication of the $1.6 million figure, which he said was skewed upwards by the inclusion in the calculation of top-end, multi-million-dollar homes.

And he urged realtors to provide average prices for specific categories of housing, which he said would give the public a more accurate overview.

A front-page article in Tuesday?squoted a sales associate of Rego Sotheby?s International Realty as saying that the average price of a free-standing home in 2006 was $1.6 million.

It added that Coldwell Banker Bermuda Realty?s year-end review had estimated that a buyer would need around $1.325 million to buy a single family home, depending on location and condition.

The figures were calculated from Government records of property sales last year.

?That was damaging information,? Sir John said. ?Now some people are reacting in a wild and woolly way, saying that we should shut down the Island to new international business and slow down the economy.

?When you state the average figure, it makes people who are selling an average house, worth $1 million or $1.1 million, say: ?This is really worth $1.6 million?.

?When you?re giving the average price for a single family home, you shouldn?t include the $5 million and $4 million homes in the calculation, because they?re in a different category.?

Everybody would lose out if sellers asked for far more than a fair valuation of their home, pricing many buyers out of the market, Sir John warned.

He added that the realtors? reports made it clear that the market was in fact little changed from a year ago, but the average house price made it seem as if prices had rocketed.

And such an apparently sharp rise might persuade the Government to take unwise action.

?If prices are seen to be accelerating at a fast rate, then I can imagine the Government feeling compelled to implement policies to help the average person to buy,? Sir John said.

?But intervention like that does not work. We did it with rent control and people are now suffering because of that as they are not getting a fair rate of return on their property. It?s unfair from a market point of view.?

The workings of the market stopped prices rising out of control, Sir John added.

He cited the fact that homes? values were appraised, so the seller couldn?t demand an unfair price; the fact that lenders assessed buyers? ability to service a mortgage debt; and the fact that buyers needed to know that their income, or the rent they would receive, would cover their mortgage payments.

?These things are the checks and balances on pricing,? Sir John said.

?Slowing down the economy does not solve the problem. If you tinker with the economy then you could ending up losing it.

?We have to build the economy so we can employ people and so that Government revenues are maintained in order to fund the educational and social services for people most in need.?

Sir John believed one of the ways to address the housing crisis was exemplified by Atlantis, the eight-storey, 60-apartment residential building ? now 80 percent occupied ? which he developed in Hamilton.?If the Government wants to allow further development of the international business sector, then it should be looking at providing incentives for people to build apartment blocks, like they have done with the hotel-condos legislation,? Sir John said.

?Encouraging locals to build apartments in Hamilton would take some of the pressure off the housing situation and ease traffic congestion, because people living there wouldn?t have to commute.?