Watchdog suspects homebuilders are working together to keep prices high

The British competition watchdog is investigating whether the prices of new-build homes are kept artificially high by cooperation between housebuilders.

The Competition and Markets Authority warned on Monday that the UK housing market needs ‘substantial intervention’ to ensure more high-quality homes are built.

It will now investigate whether Britain’s biggest housebuilders share commercially sensitive information.

Sarah Cardell, chief executive of the CMA, said: ‘The CMA has also today opened a new investigation into the suspected sharing of commercially sensitive information by housebuilders that could influence site construction and the prices of new homes.’

The companies surveyed are Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey and Vistry.

The new research came alongside a report from the CMA into the new-build housing market.

After a 12-month investigation, the regulator said the shortage of new homes was caused by a “complex and unpredictable” planning system and the “constraints” of private speculative development.

According to the Department for Leveling Up, Housing and Communities, just 212,570 homes were built in Britain in 2022/2023, well below the government’s target of building at least 300,000 homes a year.

In its research, the CMA said planning rules lead to ‘unpredictable outcomes’ and a ‘protracted amount of time’ that companies have to go through before starting construction.

It noted that many planning departments did not have current plans or incentives to build the required number of homes in a given area, and had to consult multiple stakeholders who had the power to delay project approval.

Housebuilders themselves have been outspoken critics of the British planning system, blaming it as the main cause of Britain’s overwhelming housing shortage.

In addition, researchers found that private developers assemble and sell houses based on prices, without diversifying the type and number of houses built.

The CMA also revealed that 80 percent of new homes sold by Britain’s biggest builders charge management fees.

These payments cost around £350 on average, but the regulator noted that homeowners could sometimes pay thousands of pounds in additional one-off repair costs.

Many also receive poor quality maintenance work and advance information, and face ‘unclear administration or management costs’.

Sarah Cardell, chief executive of the CMA, said: ‘Housing in Britain needs significant interventions to ensure that enough good quality homes are delivered where people need them.’

The CMA’s recommendations to reform the housing market include the creation of a New Homes Ombudsman and a mandatory consumer code to help Britons prosecute builders over any quality issues.

The regulator also wants councils to introduce facilities on all new residential areas and give homeowners the opportunity to switch to a ‘more competitive’ management company.

Following this announcement, shares of many of Britain’s largest housebuilders were among the biggest fallers on the FTSE 350.

Redrow shares were 2.3 percent lower at 647.5p, while Bellway shares were 2 percent lower at £27.06, and both Taylor Wimpey Shares And Persimmon Stocks fell by 1.8 percent.

Sophie Lund-Yates, chief equity analyst at Hargreaves Lansdown, said: ‘Seeing the rules streamlined could help some of the big listed names move more homes, but it could also increase competition.

‘The allegations of poor construction quality and anti-competitive practices will be of more immediate importance as findings against both strikes could lead to margin deterioration in the short term, but this is far from guaranteed.’