Estate agents stung by Chancellor's ban on letting fees

(ShareCast News) - In his Autumn Statement, Chancellor Philip Hammond announced he planned to clamp down on letting agent fees, sending estate agents shares lower on Wednesday.Shares of companies in the sector were sharply lower in early trade, with Foxtons were down 9%, Countrywide losing 5% and LSL Property Services more than 6% lower.Pinching an idea from Scotland, where a ban already exists, Philip Hammond said estate agents will be banned from charging fees to tenants, cutting off a chunk of revenues that has risen in recent years as administration charges have crept in for such easy activities as checking references and credit history, creating and ending contracts."This is wrong," said Hammond at the ballot box. "Landlords appoint letting agents and they should pay their fees. We will ban fees to tenants as soon as possible."Hammond believes shifting the cost to landlords will save 4.3m households hundreds of pounds.While some landlords may try to absorb the cost through rent rises, areas of high competition may be expected to see agents hit harder."Passing on the cost to landlords could drive down fees by improving competition, although estate agents claim they make no money from fees," said analyst Neil Wilson at ETX Capital, who noted that the news of a ban on charging fees still came as "a hammer blow" to estate agents.He added: "Estate agents have suffered since the Brexit vote - shares in Foxtons are still trading down around 30% from their pre-referendum level amid falling client activity. Countrywide stock is now worth a third of what it was in May 2015."Jeremy Leaf, former RICS residential chairman and an estate agent himself, said the ban would hit hardest those agents that add a lot to tenants' cost of renting."The problem with fees charged by letting agents to tenants is that landlords have a choice as to which agent they use whereas tenants generally don't. Landlords can go to another agent so the agents will have to absorb the cost and get it from somewhere else. This is why Foxtons' share price plummeted because agents like them who add a lot to the tenant's cost of renting, will suffer. The trouble is there are a few rogue agents who have been overcharging and as a result all agents will lose out financially as a result," he said.Russell Quirk, chief executive of online estate agency eMoov, noted that the government's own housing minister, Gavin Barwell, described banning lettings fees as "a bad idea" as recently as September."It is ironic that the government should be turning its guns again on the private rental sector, given that the absence of government action in building affordable homes to rent in the social housing sector has led to private landlords having to fill the gap on their behalf," he said.