Housebuilder Shares are Dropping

This morning, housebuilders were struck hard after the government announced new rules that are cracking down on leasehold practices that are described by Sajid Javid, the communities secretary, as “feudal”.

Shares in McCarty & Stone, an FTSE 250-listed company specialising in retirement homes, dropped by 10.3 percent to 152.3p on the news.

Meanwhile, on the FTSE 100, the Berkeley Group dropped 1.5 percent to 4,147.5p, while Persimmon fell 1.1 percent to 2,692.5p and Barratt declined one percent to 2,690p.

With the new rules, ground rents on new long-lease properties will be fixed to zero, while it will be simpler for existing leaseholders to buy out their freeholds.

Javid said that it was “unacceptable” for home buyers to be coerced into paying “unjustifiable” charges.

“Real action is needed to end these feudal practices,” added Javid.

In July, Javid started looking into the practices, after it appeared that some housebuilders had included clauses into leasehold contracts meaning that some ground rents doubled every ten years so that by the end of a 99-year lease, renters would have paid 256 times their original ground rents.

However, the housebuilding industry has struck back, stating that the new rules will mean that 20,000 fewer homes will be built across the United Kingdom every year, while the cost of new homes will increase by between five and 10 percent.