Four months after floating on the London Stock Exchange, the online property search company was shaken by a ministerial announcement on Tuesday that home condition reports, a key component of the proposed Hips, would not be compulsory.

Rightmove had already invested £8.5 million in preparation for the introduction of Hips and was sinking capital into the division at a rate of £1 million a month in readiness for the legislation.

The company had planned to pull together much of the documentation required for the packs and sell them to estate agents. Home information packs would have been available to download on its website as well. The home condition report, one of the key ingredients of the packs, was to have been supplied by four partners, including Countrywide, which owns a 30 per cent stake in the website.

Countrywide’s shares suffered yesterday, falling 32½p to 393¼p despite attempts to reassure investors that market estimates of revenues for this year should be unaffected by the U-turn on Hips. The company said that there may be some long-term impact on earnings if Hips are not introduced. The overall value of each pack will be lower, because less information will be required, so revenues from Hip products will be much lower than expected, Rightmove said.

Analysts at Numis Securities said that it had been envisaged that Hips packs would cost about £1,000, but now that they will contain only an energy efficiency rating, searches and title deeds, they may cost about £150. “This will have severe consequences on the financial prospects for estate agents and surveyors such as Countrywide,” Numis said.

Ed Williams, chief executive of Rightmove, was shocked by the decision, but said that the company would take its time before deciding whether to abandon its Hips division, which employs 30 people. The company is expanding rapidly and recruiting heavily to support its fast-growing online search division, which is separate from its Hips operation.

Mr Williams said that the company was likely to seek further clarification from ministers about Hips this summer, but the group would have to make up its own mind about what to do. “We have to be grown up and make a decision for ourselves, but we will wait until the Government can give us a considered view rather than hammering at their door for an explanation right now,” he said.

Analysts at Panmure Gordon downgraded the Rightmove shares from “buy” to “hold” and slashed its price target from 425p to 310p. In a morning note Alex DeGroote said that he now valued Hips for Rightmove at zero.

The setback came just weeks after Rightmove had unveiled an encouraging first-half trading statement. Since floating at 335p, the shares had soared to 413.75p in March and achieved a sky-high rating. Yesterday they closed down 77p at 275p.

Explore Industry Sectors

• Banking & Finance

• Construction & Property

• Consumer Goods

• Engineering

• Health

• Industrials

• Leisure

• Media

• Natural Resources

• Retailing

• Support Services

• Technology

• Telecoms

• Transport

• Utilities

Times Recommends

• B&B shareholders forced into funding rescue
• John Lewis department store sales plunge 8.3%
• Families turn to credit to cover mortgage bills