Is housebuilders landbanking good or bad for shareholders?

Land banking is back in the headlines. Labour and the Conservatives have promised action as the competition watchdog continues its probe, launched earlier this year, into whether the practice is “anti-competitive”. Critics argue this cartel-like behaviour drives up house prices, but defenders argue it is just good business.

There is no doubt that housebuilders’ land banks have swelled over the past decade. According to Investors’ Chronicle analysis, the FTSE 350 housebuilders’ land holdings have soared 67 per cent since 2013 (see table). For this reason, both the practice and the potential response from politicians are worthy of investor consideration due to the impact they may have on both the housing market and housebuilders themselves.