The private rented housing market came under renewed pressure after chancellor Philip Hammond announced proposals to ban letting agents from charging tenants fees.
While the move may look to be good news for the 4.3m households that pay these fees, the proposals were roundly condemned by letting agents and landlords.
The charges, which average around £330, will now fall on the landlord to pay, and this will almost certainly be passed on to the tenant in the form of higher rents. The decision was derided by some as little more than a crowd-pleaser.
Letting agents argue fees have risen in recent years because of the greater regulatory burden placed on agents through legislation, as well as standard administration such as checking references and running credit checks.
The latest proposals will come as a further blow to landlords already facing higher stamp duty on purchases and the introduction next year of a taper on mortgage interest relief. Forcing more landlords out of the rental market will ultimately restrict supply and push rents even higher.
London-focused estate and letting agent Foxtons (FOXT) was hit the hardest, with its shares falling over 12 per cent. Others, including LSL Property Services and Belvoir Lettings, were also hit.
Foxtons saw revenue from lettings rise from £22.6m to £22.8m in the third quarter and with the now-banned fees likely to be passed onto landlords, the impact could be less than the share price fall suggests.
Russell Quirk, founder of hybrid estate agent eMoov, called the tenants fee ban "nothing more than opportunistic tokenism", adding that the agents will "make their money regardless".
"We’ve seen the same thing happen in Scotland whereby the landlord must charge more to the tenant in rent to cover the increase charged by the agent," he said.
"You would think the government would have known this.”
Rents rose 8 per cent in Scotland after the change and the other pressure emerging is that in the past two months, UK landlords have sold more properties than they have bought.
The need for private rented accommodation could be reduced if there were sufficient numbers of affordable houses being built, and new proposals will make £1.4bn available to fund an extra 40,000 affordable homes and £2.3bn for a housing infrastructure fund will enable construction of an additional 100,000 homes in areas of high demand.
This may prove a boon to brickmakers Ibstock (IBST) and Forterra (FORT) and the focus on sites for fresh housing developments could be good news for MJ Gleeson (GLE), St Modwen (SMP) and Henry Boot (BHY), which own land they could sell or develop themselves if urban sites are being unlocked for property.
