A fundamental shift is required in the way housing markets operate if the 21 million new homes needed annually in the developing world are to be delivered, according a new report published by the Royal Institution of Chartered Surveyors. The report, 'Improving Housing Markets', argued that heavy-handed government intervention had been a significant contributor to the scale of the housing crisis the world faces, and that housing policies in developed nations did not offer a suitable role model for other countries. The report's author, Michael Ball of Reading University in Britain, said: 'Government intervention has been a hallmark of housing policy around the world for much of the post-1945 period, but the results have often been poor. 'Market processes are generally the best way to deal with housing problems. Policies need to build up the institutional structures of markets rather than undermine them.' Professor Ball believes the Hong Kong housing market has been blighted by oversupply since 1997, and that it would operate more efficiently with less government interference. In his report, he suggested that private rented housing throughout the world had been driven off the market by over-regulation and rent controls. Attempts by many developing nations to copy European social housing policies had often collapsed because these countries lacked the resources to make the policies work. The result was that up to 70 per cent of new housing in many countries was now 'informal', with households paying high prices for housing in shanty towns, the report said. At the same time, house prices in Africa and Asia were typically seven to nine times annual household incomes - far above those in the developed world. In China, the biggest barrier to creating an efficient housing market was knowing what to do with the large amounts of state housing stock, the report said. To boost housing supply worldwide, Professor Ball called for four main changes: property laws should be reformed to give people clear property rights and the means to enforce them; ways should be developed to provide mortgage finance; exorbitant transaction costs should be reduced; better building regulations and planning frameworks should be put in place. However, Gareth Williams, chief executive of property consultancy Knight Frank Hong Kong, said government intervention had provided the most efficient way to house millions of refugees who had entered Hong Kong during the last Chinese civil war. 'It was shown back in 1948 to 1949 that market forces could not help to accommodate a large influx of people because, in a free-flow economy, both sales prices and rentals would be driven up.' He also said Hong Kong's housing market needed regulation. 'The government is very sensitive to public opinion, so that some types restrictions are introduced when prices get out of hand. 'An example of this is the Landlord and Tenant Ordinance, which first restricted rents and then, in more recent times, security of tenure,' he said. Mr Williams disagreed with Professor Ball's assertion that the slump in Hong Kong's post-1997 housing market was the result of an oversupply of property. Weakening demand caused by the dampening effects of the Asian financial crisis and Hong Kong's currency peg with the United States dollar had affected the housing market the most, he said. 'The deflationary spiral in Hong Kong means the man in the street has lost confidence in retaining his job. Even where the job is secure, his income level is reduced by wage cuts. It is this lack of confidence to make a long-term commitment that has been the main problem in achieving sales of flats in Hong Kong.' Professor Ball responded: 'Falling demand and oversupply are the same thing to an economist. Demand falls, so supply is too great and prices are cut to try to balance the market.'