UK housebuilders face CMA probe over info sharing, home quality

26th Feb 2024 07:52

(Sharecast News) - Britain's competition watchdog has started an investigation into eight housebuilders over evidence they may have been sharing information which could be harming competition in the sector and influencing prices.

In a major report released on Monday, the Competition and Markets Authority said it had "fundamental concerns" with the operation of the housing market, revolving around the planning system, estate management charges and the quality of new housing.

The CMA said it had "found evidence during the study which indicated some housebuilders may be sharing commercially sensitive information with their competitors, which could be influencing the build-out of sites and the prices of new homes".

Companies being investigated are Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey, and Vistry. Housebuilders have faced accusations of constricting supply to maximise returns, prioritising shareholders ahead of consumers and selling homes with shoddy workmanship.

It added that it had "substantial concerns" about estate management charges - where homeowners face high and unclear charges for the management of facilities such as roads, drainage, and green spaces.

The monopolies watchdog says it has "fundamental concerns" with the housebuilding market, claiming that the "complex and unpredictable planning system, together with the limitations of speculative private development, is responsible for the persistent under delivery of new homes".

Britain's reliance on speculative private development had led to a widening gap between what the market will deliver and what communities need, the CMA said, with developers producing houses "at a rate at which they can be sold without needing to reduce their prices, rather than diversifying the types and numbers of homes they build to meet the needs of different communities".

"Housebuilding in Great Britain needs significant intervention so that enough good quality homes are delivered in the places that people need them," said CMA chief executive Sarah Cardell.

"Our report - which follows a year-long study - is recommending a streamlining of the planning system and increased consumer protections. If implemented, we would expect to see many more homes built each year, helping make homes more affordable."

AJ Bell investment director Russ Mould said that while housebuilders "may all profess to want to help with the national mission of building more homes ... there is also an advantage to housebuilders if the balance between supply and demand remains tight".

"This helps sustain higher house prices and supports their margins. The CMA notes this is not a significant factor in the persistent under-delivery of homes, nonetheless it is sufficiently concerned that competition in the market has been undermined to take a closer look."

"Housebuilders may also argue the proposed introduction of more red tape, including the establishment of a New Homes Ombudsman, will clip the sector's wings. However, previous issues around build quality and treatment of customers means they are reaping what they have sown."

Reporting by Frank Prenesti for Sharecast.com