- Seven listed housebuilders and one private housebuilder under investigation
- "Some housebuilders may be sharing commercially sensitive information": CMA
Eight of Britain's largest housebuilders are under investigation by the UK's anti-trust watchdog over concerns that they may have breached competition law by sharing "commercially sensitive information" to influence prices. On Monday 26 February, the Competition and Markets Authority (CMA) also published the results of a year-long investigation, and said it had "fundamental concerns" about the housing market and low supply of new houses.
Listed housebuilders Barratt Developments (BDEV), Bellway (BWY), Berkeley Group (BKG), Persimmon (PSN), Redrow (RDW), Taylor Wimpey (TW.) and Vistry (VTY), plus Bloom Homes, all face the new information probe, sending their shares down by around 3 per cent in morning trading.
The new probe overshadowed the regulator's conclusion that the industry was not holding back house development through 'land banking', the process of sitting on plots until demand rose in the area.
The CMA said it had "found evidence during the study that 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".
"While the CMA does not consider such sharing of information to be one of the main factors in the persistent under-delivery of homes, the CMA is concerned that it may weaken competition in the market," it added.
The watchdog also found that "housebuilders don’t have strong incentives to compete on quality and consumers have unclear routes of redress". It added that "a growing number" of new-build homeowners have reported faults and that a "substantial minority also experienced particularly serious problems with their new homes, such as collapsing staircases and ceilings".
CMA chief executive Sarah Cardell said the industry needed "significant intervention" in order to increase the number of houses built every year. The government has set a goal of 300,000 new dwellings a year, but this is routinely missed by tens of thousands of homes.
The CMA also criticised the nature of private development, noting that "private developers produce 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 (for example providing more affordable housing)". It added that land banks were a symptom of this rather than the reason for the shortage of new homes.
The CMA was also critical of the planning system, arguing that it produces "unpredictable results" and that it "often takes a protracted amount of time for builders to navigate before construction can start".
"The report highlights that many planning departments are under-resourced, some do not have up-to-date local plans, and don’t have clear targets or strong incentives to deliver the numbers of homes needed in their area," the CMA added.
Peter Bill, author of Broken Homes, a book on UK housebuilding, called the price-sharing investigation the "sting in the tail", saying it "could prove nasty".
"Shining a spotlight on what goes on in terms of who controls what, who owns what, who swaps land with who and for what price is in the public interest," he said. "If the CMA finds major housebuilders have been colluding on the terms and prices offered for land, they deserve what's coming. Particularly if it's public land."
EMCs were another issue raised by the report, whereby housebuilders charge homeowners fees to maintain public land due to councils' inability or unwillingness to do it themselves. The CMA found that 80 per cent of new homes sold by the 11 biggest builders from 2021 to 2022 were subject to estate management charges.
