The Government will be asked to consider approving a new type of fund, which would make it easier and more tax-efficient to invest in the property market. Mr William Nowlan, an Irish property consultant and head of the Irish Property Unitisation Association, a trade group, said broad agreement had been reached on the creation of a fund which would resemble a US-style real estate investment trust and be listed on the Dublin Stock Exchange. The proposal would extend the tax advantages of investors who buy properties directly to those who invest in the property sector through funds.

However, the Department of Finance spokesman said the issue had yet to be considered by the Government.

The move comes as Irish and British pension funds and life insurers, discouraged by lack of liquidity and high management costs, reduce their investments in property. Net investment in property by British pension funds was £37 million in the first half of 1997, down 70 per cent from the previous year. Mr John Whalley, property director at AMP Asset Manager, one of the Britain's largest property investors, said any Irish move would raise pressure on Britain to follow suit.

Mr Brian Davy, a member of the IPUA and chairman of Ireland's largest stockbrokers, Davy Stockbrokers, said it was expected that final approval for the new property funds would be granted before the end of the year, with the first offering probably in early 1998.

The explosive growth of real estate investment trusts in the US, and the resulting liquidity they have provided for property investors, have caused institutions in Europe to begin pressing for funds with similar tax treatment.

The US trusts do not pay corporate taxes provided that they distribute 95 per cent of their net income as dividends. In Britain, property companies have to pay corporate taxes and their shareholders pay tax on dividends and capital gains.

Managers of the new funds will be required to value the properties in the fund periodically. The prices of units in the new fund will be quoted on screens, providing immediate price transparency.

Mr Nowlan noted that the new Irish funds would not guarantee that investors would make bigger profits out of property investment. But the new funds will at least improve liquidity, "a far cry from the situation during the period 1990-93 when most large properties were unsaleable in Ireland".