LONDON (Alliance News) - Real estate advisor Savills PLC on Wednesday said the UK government's decision to ban lettings agents fees for tenants will limit the amount of new rental stock, driving up rents and providing less choice for tenants.
UK Chancellor of the Exchequer Philip Hammond on Wednesday confirmed earlier speculation that letting agent fees for tenants on private rented sector properties will be banned in his Autumn Statement.
The announcement caused shares in estate agents to slump on Wednesday afternoon, with London-focused Foxtons Group PLC trading down 15% at 104.25 pence, Countrywide PLC trading down 5.8%, and LSL Property Services PLC off 3.7%.
Savills was down 0.9% at 680.00p.
"We do not believe that landlords will be able simply to pass this additional cost on to tenants by way of rent," Head of Savills UK Residential Research Lucian Cook said.
"Instead we expect it to result in higher costs for landlords, in a sector already facing increased taxation and greater mortgage regulation. That is likely to curb private investor appetite for residential investment and limit the amount of new rental stock at a time of growing demand for rented homes," Cook added.
Savills said this is expected to mean less choice for tenants and upward pressure on rents that plays out over a longer period.
Elsewhere Foxtons noted the policy change was "an unexpected announcement", though said it will review the impact to its customers and on its business as it gets more clarity.
In his Autumn Statement, Hammond said the ban was being implemented as recent years have seen letting fees "spiral, often to hundreds of pounds".
"This is wrong. Landlords appoint letting agents and landlords should meet their fees," Hammond said. The policy change should come in "as soon as possible", he said.
Research from consumer group Citizens Advice recently found letting agents charged average fees of GBP337, and in some cases up to GBP700.
National Landlords Association Chief Executive Richard Lambert said letting agents will have "no other option than to shift the fees on to landlords, which many will argue is more appropriate, since the landlord employs the agent".
"But adding to landlords' costs, on top of restricting their ability to deduct their business costs from their taxable income, will only push more towards increasing rents," Lambert added.
Elsewhere, in his Autumn Statement, the chancellor announced a housing package which he said should more than double annual capital spending on housing over the course of this parliament.
Hammond said the government will put GBP2.30 billion into a Housing Infrastructure Fund.
The fund will deliver infrastructure for up to 100,000 homes in areas of high demand, Hammond said, noting that "one of the biggest objections to housing development is the impact on local infrastructure".
A further GBP1.40 billion will be invested to deliver 40,000 additional affordable homes by 2020/21, Hammond said.
Signalling to a further devolution of powers, Hammond said London will receive GBP3.15 billion as its share of national affordable housing funding, which should enable the capital to deliver more than 90,000 new homes.
The chancellor pointed to his continued support for home ownership through the Help-to-Buy Equity Loan scheme and the Help-to-Buy ISA, though there was no specific extension of the scheme beyond 2021.
A large-scale regional pilot of the Right-to-Buy for housing association tenants was also announced, and Hammond said rules on government grants will be relaxed to allow developers to build a larger range of housing types.
Further information as to these policies is expected in the upcoming Housing White Paper, which Hammond said will be published "in due course" and will address long-term challenges to the sector.
By Hannah Boland; hannahboland@alliancenews.com; @Hannaheboland
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