OFT probes housebuilding sector

The study will not look at where new homes should be built

The Office of Fair Trading has announced it is launching an investigation into the housebuilding industry in the UK.

It will examine how regulation and competition might work more effectively, and will examine customer satisfaction and planning issues.

The UK housebuilding sector is worth £20bn a year, and the OFT study is expected to be completed by mid-2008.

Critics complain that too few houses are being built, pushing up prices.

Industry consulted

The investigation is being undertaken in the wake of the Barker Review of Housing Supply 2004, which recommended that there should be a relaxation of planning rules to allow the building of more affordable homes.

Since then the OFT has been monitoring the housebuilding market and says it is concerned that it may not be working well for consumers.

It says it will be working with the industry as part of its review, which could result in a market investigation reference to the Competition Commission.

Unresponsive housing supply hinders labour mobility, constrains economic growth, and harms consumers John Fingleton, OFT chief executive Send us your comments Q&A: Housebuilder probe

Other possible outcomes include giving the market a clean bill of health, publishing information to help consumers, or enforcement action against companies suspected of breaching consumer or competition law.

Part of the reasons for the review is the fact that the construction industry had been asked to draw up a code of conduct and that had not been developed.

The study will not look at the overall question of where development should occur or the environmental impact of new homes.

The OFT chief executive John Fingleton said: "This is the first in-depth examination of competition and consumer issues in new housebuilding.

"This is a hugely important market for the economy because of its substantial economic impact and because unresponsive housing supply hinders labour mobility, constrains economic growth, and harms consumers."

'Speed up'

Housebuilders have complained that a complicated planning process is one of the main reasons of undersupply and have urged the government to relax the planning system.

The number of homes built each year has declined in most of the last 15 years, while the number of households has continued to grow.

"Persimmon is very keen to speed up the planning process and anything that would help that would be welcomed," a spokesman for the UK's largest housebuilder by market value said.