OFT examines house-builders

Consumer affairs watchdog the Office of Fair Trading (OFT) has begun an investigation into the £20 billion UK house-building industry over concerns that the sector is failing to deliver for consumers. Focusing on customer satisfaction and planning issues, the inquiry follows years during which the number of new homes built has lagged demand, helping to fuel a boom in house prices that has driven many first-time buyers out of the market and saddled many with increasingly onerous mortgages.

Reporting back by the summer of 2008, the study will examine how regulation and competition in the sector could work more effectively, weighing up whether land suitable for development is being effectively brought to the planning approval stage, whether land with planning permission is being converted effectively into homes and whether buyers themselves are actually satisfied with the properties available.

Possible outcomes from the study, according to the OFT, include the issuance of a clean bill of health for the market, reference to the Competition Commission, an encouragement for companies to take voluntary action or the making of recommendations to the Government.

In a statement, OFT boss John Fingleton stated, ‘This is the first in-depth examination of competition and consumer issues in new house-building. 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.’

Major quoted players in this sector, subject of a recent wave of consolidation, include FTSE 100 players Persimmon and Barratt Developments, as well as FTSE 250 venture Taylor Woodrow. AIM-listed movers and shakers include Oakdene, Artisan and Eatonfield.