Office of Fair Trading Publishes Housebuilding Market Study

The Office of Fair Trading has published its market study into the homebuilding sector called "Download Homebuilding in the UK - a market study", which 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. The report says that on the whole barriers to entering the market appear low, and that prices are set through homebuilders competing for sales against each other and are significantly constrained by the prices of 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, which include:

• delays in moving in
• faults in new homes, and
• issues around the sales process including 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.


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