UK Housebuilders Stocks Fall on CMA’s Competition Investigation

The Competition and Markets Authority (CMA) has completed its extensive analysis of the housebuilding industry across England, Scotland, and Wales, issuing a comprehensive report. This report attributes the ongoing shortfall in new home construction to the complex and unpredictable planning system and the constraints inherent in speculative private development models. 

The investigation also raised significant concerns regarding estate management fees, which have seen homeowners burdened by high and often opaque charges for the upkeep of communal facilities such as roads, green spaces, and drainage systems. 

Furthermore, the past decade has seen an uptick in new homeowners reporting issues with the quality of their homes, ranging from minor defects to major structural problems.

Sarah Cardell, the CMA's Chief Executive, emphasised the urgent need for reform in the housebuilding sector to ensure the delivery of high-quality homes in the numbers and locations required. The CMA's recommendations include overhauling the planning process and strengthening consumer protections.

These measures, if adopted, are expected to significantly increase the annual production of new homes, reduce estate management fees, and improve overall housing quality. However, Cardell noted that even with these changes, further efforts may be necessary to achieve the desired levels of housing availability.

Additionally, the CMA has initiated a new inquiry into potential anti-competitive practices among housebuilders, specifically the suspected exchange of commercially sensitive information. This behaviour could impact the housing construction and pricing pace, further exacerbating the housing shortage.

The report sheds light on the diverse landscape of the housebuilding industry, noting that large national builders delivered around 40% of new homes in the recent period. In contrast, smaller regional builders contributed over 50,000 units. Despite this diversity, the predominant reliance on speculative private development has widened the gap between housing supply and community needs.

The Competition and Markets Authority (CMA) has initiated a probe under the auspices of the Competition Act 1998 targeting several key players in the housebuilding sector, including Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow, Taylor Wimpey, and Vistry. At this juncture, the CMA has yet to determine if there has been a breach of competition regulations.

The report sheds light on the diverse landscape of the housebuilding industry, noting that large national builders delivered around 40% of new homes in the recent period. In contrast, smaller regional builders contributed over 50,000 units. Despite this diversity, the predominant reliance on speculative private development has widened the gap between housing supply and community needs.