Shares in Rightmove and Countrywide, the estate agent businesses, tumbled yesterday as the pair warned the Government's U-turn on Home Information Packs (Hips) could hit their future profits.
Yvette Cooper, the Planning and Housing minister, revealed on Tuesday that the Government was scrapping a policy which would have forced all sellers of residential property to pay for a survey on their home before bringing it to market. The plans, which would have cost sellers between £650 and £1,000, were due to come into force next June.
Although Hips will still become a mandatory requirement from next summer, they will no longer have to contain a Home Condition Report (HCR), the most expensive part of the pack, which would have incorporated a structural survey and valuation.
In statements released to the market yesterday morning, Countrywide and Rightmove said they had invested considerable time in preparing for the introduction of Hips, adding that their profits may be affected from 2007 onwards as a result of the Government's volte-face.
Rightmove, an online operation, issued the bleaker of the two statements, conceding it had invested considerable resources in building new systems and training new staff in preparation for the launch of Hips.
"Rightmove believes that it had put in place the systems, people and capabilities to be able to implement Hips in line with the original timetable and specification," it said. "The implication is that the overall value of each Hip will be lower than previously expected. Accordingly, revenues and potential earnings from Rightmove's Hips product are likely to be significantly lower than current market expectations."
Rightmove shares plummeted by more than 20 per cent to 280.75p, giving the business a market value of £356m.
Although Countrywide said it had not directly invested any money this year in preparation for the introduction of Hips, it said it was unclear what the long-term effects of the policy reversal would be. "Whilst there may be some long-term impact on the group's earnings if HCRs are not introduced, the broader market outlook for 2007 has now become clearer," it said.
Shares in Countrywide fell 7 per cent to 397.75p, giving the company a market value of £698m.
Consumer groups have criticised the Government for its U-turn, claiming it is a loss for consumer protection.Reuse content