The Federation of Estate Agents is asking the government to cut tax on the property market in view of the economic climate.

The market has been experiencing a lull, with prices in the first quarter of the year dropping by 15 to 20 per cent compared with the same period last year. Prices in 2008 had also gone down by 15 per cent.

The FEA listed three key areas where priority policy measures were needed.

It said the present system of capital gains taxation on real estate was threatening to further stall market activity, recommending that the system of capital gains on real estate be rendered a flat 15 per cent on profits.

As a second best option, the federation proposed that the five-year period applying to the 12 per cent final withholding tax option should be extended or, ideally, removed.

The FEA also recommended that restrictions on the letting out of real estate by foreigners in Malta be removed, blaming them for limiting market activity.

It also proposed the removal of fees and regulations that "distort the rental market and the introduction of a favourable tax regime intended to enhance the efficiency of the real estate sector and its economic contribution".