Housing experts warned that Labour plans to bring in rent controls could lead to investors pulling out of the rental market.
The Association of Rental Letting Agents (ARLA) said yesterday that three-quarters of its members feared the plans would “see landlords exit the market and reduce supply”.
Such fears led to an immediate sell-off in housebuilding stocks in the early part of the day, although they largely recovered by the close.
Three FTSE 100-listed housebuilders (Taylor Wimpey, Barratt Developments and Persimmon) lost nearly £200m in combined value in the early hours yesterday, as investors reacted to Labour’s weekend proposals to prevent private landlords from raising rent by more than the Consumer Price Index (CPI).
Taylor Wimpey fell 2.5 per cent to 165.77p within the first hour of trading on the news, while Barratt dropped 2.3 per cent to 531.00p. Persimmon slipped 1.9 per cent to a day’s low of 1759.00p.
But all three stocks on the UK blue-chip index broadly recovered their losses, with Taylor Wimpey finishing the day at 168.08p, Barratt closing at 537.00p and Persimmon ending at 1,756.29p.
Clyde Lewis, an equity analyst at Peel Hunt, said while the Labour announcement prompted a sell-off, he did not expect the proposals to have long-term implications for housebuilders, which should continue to benefit from strong demand for their services.
“We still need one million or more homes in this country,” Lewis said. “It’s going to be a long, long time before we close that gap.”
Traders said the proposals could weigh on the housing market, which in turn was contributing to the drop in housebuilder stocks, even though Labour also said it would scrap stamp duty for first-time buyers. “Rent controls will affect the housing sector,” said Atif Latif, director of trading at Guardian Stockbrokers yesterday.