Estate agent shares tumble as Philip Hammond plans to axe up-front letting fees

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Estate agents' shares have tumbled into the red ahead of Chancellor Philip Hammond's move to end up-front letting agents' fees for millions of private rental sector tenants.

Countrywide, Foxtons and Savills came under pressure on the stock market as the crackdown - set to be outlined in the Autumn Statement - will mean a ban on lucrative fees for letting agents.

The move is aimed to help 4.3 million households in private rental housing, with up-front fees typically costing hundreds of pounds.

Citizens Advice has said renters can expect to pay £337 on average, while Shelter has found that one in seven private sector renters who used a letting agent had paid more than £500.

London estate agent Foxtons was the worst hit in the sector, with its stock falling by more than 13%, while Countrywide saw shares drop 7%, Purplebricks fell as much as 5% and Savills was 1% lower.

Mr Hammond is also due to unveil measures to boost housing levels, with a £1.4 billion cash injection to help build 40,000 new homes, while restrictions on the use of existing affordable housing funding will be relaxed.

The Treasury has said the moves will help to improve the affordability of housing and renting.

Campbell Robb, chief executive at Shelter, said: "This extra investment will be welcome news for many of the 'just about managing' families crying out for homes that are genuinely affordable. It's promising to see restrictions on funding relaxed, which should help to build the homes that those struggling actually need - including affordable homes to rent.

"At Shelter we see the impact of our chronic shortage of affordable homes every day, with increasing numbers of people left with no choice but to fork out most of their hard-earned wages on expensive private rents, and wave goodbye to the chance of a stable home."

But the Association of Residential Letting Agents (ARLA) criticised the "draconian" measures.

David Cox, managing director of ARLA, said banning letting agent fees would have a "profoundly negative impact on the rental market".

He added: "It will be the fourth assault on the sector in just over a year, and do little to help cash-poor renters save enough to get on the housing ladder.

"This decision is a crowd-pleaser, which will not help renters in the long-term."

Shadow housing secretary John Healey said the affordable housing announcement was "too little, too late".

"Six years of Conservative housing policy has led to the lowest level of new affordable housebuilding in 24 years," he said.

"The reality is ministers' deep cuts have left a funding shortfall of over £17 billion compared to the plans I left as Labour's last housing minister. Today's announcement doesn't even make up a 10th of that."

Jeremy Blackburn, head of policy at the Royal Institution of Chartered Surveyors (Rics), said: "With increasingly unaffordable house prices, the majority of British households will be relying on the rental sector in the future."

He said it now seems the Chancellor will "drive an affordable rental agenda". 

Mr Blackburn continued: "We would add one note of caution around the proposed end to letting agent fees. Government must strike the right balance between allowing credible, regulated letting agencies to recover reasonable costs and the unquestionable need to protect tenants from suffering excessive charges by less scrupulous agents."