Shares in Britain's leading estate agents including Foxtons and Countrywide tumbled on Wednesday as a government plan to ban one-off tenant fees compounded pressures building in the sector from Brexit.
The change in policy, due to be announced by finance minister Philip Hammond in parliament, was lauded by the government as a sign that it was working to protect low earners from additional and often unexpected costs from private landlords.
The government believes the policy to ban letting agents' fees will help 4.3 million households renting privately avoid charges for everything from checking references to preparing or renewing tenancy agreements.
The Treasury quoted independent group Citizens Advice as saying the fees averaged 337 pounds ($417), while homeless charity Shelter said that 1 in 7 pay more than 500 pounds.
The news sent shares in Foxtons, a symbol of London's booming property market in recent years, down 11 percent in early trading while Countrywide shares fell 7 percent. Upmarket estate agent Savills fell 1.5 percent while LSL Property slumped 6 percent.
"News of a ban on charging fees to tenants comes as a hammer blow to embattled estate agents," market analyst Neil Wilson at ETX Capital said.
"Estate agents have suffered since the Brexit vote - shares in Foxtons are still trading down around 30 percent from their pre-referendum level amid falling client activity. Countrywide stock is now worth a third of what it was in May 2015."
The cost of renting has risen sharply across certain parts of Britain in recent years, heaping pressure on households who have endured weak wage growth since the financial crisis.
Richard Price, Executive Director at the UK Association of Letting Agents (UKALA) said the bans sounded appealing as a quick fix, but the problem of affordability in the private-rented could not be addressed by preventing legitimate businesses from charging for their services.
"A ban on agent fees may prevent tenants from receiving a bill at the start of the tenancy, but the unavoidable outcome will be an increase in the proportion of costs which will be met by landlords, which in turn will be passed on to tenants through higher rents," he said.
