Homebuilding in the UK

25 September 2008

The OFT's market study into the homebuilding sector says that while the sector is broadly competitive, many homebuyers experience faults or delays. As a result, the industry has agreed to develop its own code of conduct and redress scheme for consumers.

The OFT found little evidence of competition problems with the delivery of new homes in the UK. On the whole, barriers to entering the market appear low, and it is likely to be the case that homebuilders compete for sales against each other and existing homes. There is no evidence that individual homebuilders have persistent or widespread market power giving them the ability to restrict supply in order to inflate prices.

However, the OFT found that homebuyers can experience a number of problems, including:

• delays in moving in
• faults in new homes, and
• issues around the sales process such as reservation fees, the clarity of information provided to homebuyers and potentially unfair terms and conditions in contracts.

As a result, representatives from across the sector have agreed to form a body to deliver a code of conduct and redress scheme for consumers, which it aims to have fully operational by March 2010. However, if the industry fails to make adequate progress or deliver an effective solution, the OFT recommends further intervention through a statutory redress mechanism. This would involve a means of redress for homebuyers with the ability to award compensation for any failings in the sales process, shortcomings in contracts, delays or faults, and would need to be funded by a levy on the industry.

The study also found no evidence that homebuilders have the ability to anti-competitively hoard land or withhold a large amount of land with planning permission on which they have not started to build. Instead, it is likely to be the case that 'landbanking' reflects the need for firms to have a pipeline of land at different stages in the development process.

The report also stresses the importance of maintaining a vibrant small and self-build sector. This includes recommending that the Government and the Welsh Assembly should help small homebuilders and self builders meet the technological advances required by the Code for Sustainable Homes by enabling them to make use of 'off-the-peg' solutions. They should also consider assisting small homebuilders and self-builders to access the necessary technologies to overcome the zero carbon challenge.

See press release

Download Homebuilding in the UK - a market study (pdf 768 kb).

• Erratum to report (pdf 35 kb).

Annexes - all pdf files

• Annexe A - List of consultees and contributors (70 kb) 
• Annexe B - New homebuild consumer survey - report on findings (506 kb)
• Annexe C - Mystery shopping exercise (311 kb)
• Annexe D - Homebuilders' survey (263 kb)
• Annexe E - Study investigating financing for homebuilders (542 kb)
• Annexe F - Case studies (224 kb)
• Annexe G - Review of legal framework (313 kb)
• Annexe H - Review of alternative dispute resolution (212 kb)
• Annexe I - Regulation affecting the industry (130 kb)
• Annexe J - New home warranties (380 kb)
• Annexe K - Review of the homebuying process (98 kb)
• Annexe L - Comparison of consumer satisfaction levels (165 kb) 
• Annexe M - Consultation with stakeholders (2.54 mb)
• Annexe N - Comparison of housing market areas and LPA boundaries (592 kb)
• Annexe O - Calculation of residual land values (99 kb)
• Annexe P - Planning permissions database (69 kb)
• Annexe Q - Analysis of LPAs with high concentration (66 kb) 
• Annexe R - Alternative development models (165 kb)
• Annexe S - A planning appeal case study: Wealden (66 kb)
• Annexe T - Homebuilding and land use (77 kb)
• Annexe U - Land ownership databases (103 kb)
• Annexe V - Land ownership data sources (78 kb)
• Annexe W - Land ownership profiles by type of homebuilder (72 kb)
• Annexe X - Glossary (87 kb)

 

Download Competition in local homebuilding markets (pdf 512 kb) - a report for the OFT by Catherine Ball.

Background

25 July 2008

In order to facilitate its ongoing discussions with key stakeholders and in the interests of transparency, the OFT publishes two draft reports.

Download Mystery shopping exercise for the Homebuilding market study (pdf 312 kb).

Download Homebuilding market study - New home warranties (pdf 1 mb).

26 June 2008

The OFT publishes two draft reports that it commissioned as part of this market study.

Download New homebuild consumer survey (pdf 505 kb).

Download Study investigating financing for homebuilders (pdf 648 kb).

See press release.

6 June 2008

Following discussions with the NAO about its announced study into part of the planning regime, the two organisations worked together to make sure that the scopes of the two studies are complementary. In order to avoid an overlap with the NAO we refined the scope of our homebuilding market study to omit any detailed examination of the planning regime. We limited our work on planning to looking at the impact of features which may have a strong link to our analysis of competition.

24 October 2007

One thousand new-build home owners will be invited to take part in a survey by the OFT offering them the opportunity to contribute to its home building market study.

See press release

22 June 2007

The OFT launches a market study into home building in the UK.

The main factors that have influenced the OFT's decision to carry out a market study are:

• the importance of home building to the economy
• customer satisfaction has not increased substantially since the Barker review of housing supply
• for many people buying a house is the largest purchase they will ever make
• the significant level of Government involvement in the housebuilding sector.

Download Home building - reasons for a market study (pdf 101 kb).

See press release.

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