Q&A: OFT housebuilding review

The Office of Fair Trading has launched an investigation into the house-building industry.

It wants to look at issues such as why it often takes so long for local authorities to grant planning permission for new homes, and if consumers are happy with the standard of new homes.

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What does the OFT probe entail?

There are two strands to the study - how competition and the planning system affect the delivery of new homes, and to investigate how satisfied homebuyers are with the new homes they purchase.

What is the exact reason for the housebuilding study?

The OFT is concerned that the market for housebuilding is not working well and there appears to be "significant consumer detriment" in the form of low supply and rising prices, as well as low levels of quality.

They also point out the importance of housebuilding to the economy. In 2006 it was estimated that the value of the private housebuilding market in Great Britain was estimated at around £20bn.

Any other reasons?

Yes, the OFT is concerned that there has been no great increase in housing supply since the low number of new homes being built was highlighted by the Barker Review of Housing Supply in 2004.

That review also called on the housebuilding industry to develop a code of conduct for new house sales, but no code has been developed.

What about other issues such as the availability of land?

The OFT is also concerned to find out whether available land for housebuilding is being effectively bought through the planning process in the fastest possible way.

The chief executive of the OFT, John Fingleton, said: "I think there are two issues on the supply side."

"One is pre-approval, land that's zoned for development and how it gets into the housing planning process," he explained.

"The second delay is once land is zoned or has got approval for planning there seems to be a very long delay in many cases before it's brought to the market.

"We'd like to understand better why those delays are there and how the market can be more responsive to changes in demand."

Who will the OFT be consulting?

The eight-strong OFT investigation team will consult industry and consumer bodies, businesses, government departments, local planning authorities and independent experts as part of its review.

When will its findings be published?

It hopes to publish its initial findings by the middle of 2008.

What are the possible outcomes of the investigation?

There are a number.

They include giving the market a clean bill of health and publishing information to help consumers.

The OFT could encourage firms to take voluntary action, and push forward plans for an industry code of practice, as well as making recommendations to the Government or sector regulators.

It also could continue the investigation and take action against companies suspected of breaching consumer or competition law, even going so far as make a recommendation for a further investigation by the Competition Commission.