26 February 2024
If you are covering that the Competition and Markets Authority (CMA) has launched an investigation into eight housebuilders in the UK, please see the following comment from Oli Creasey, property analyst at Quilter Cheviot:
"This morning’s announcement from the CMA regarding the housebuilding market have two separate headlines, with the second being more painful for housebuilding companies than the first.
"Up first is the conclusion from the CMA’s report that places the blame for slow house-building (the country habitually misses its target for new home deliveries) largely on the planning system that it describes as protracted and unpredictable, as well as under-resourced. That may not be a surprise for anyone who has tried to navigate the planning permission system in recent times, but is something of a vindication for housebuilding firms. The original study was also looking into the industry’s use of landbanks, with early suggestions being whether builders were stockpiling land and artificially slowing delivery. The conclusion instead is that land-banking is a consequence of the slow planning process – i.e. it might make sense to carry multiple years’ worth of land on balance sheet if planning takes years to complete. Housebuilders will be relieved that their strategy has avoided this blame.
"However, the other headline – that housebuilders may have shared information regarding pricing, incentives and sales rates – is more troubling. While it is not named as a primary factor in the under-delivery of new homes, it is still possible that firms are found to have broken the law, and fines may be levied as a result. It is difficult to judge the probability of this outcome. While the property market does not have a reputation for arch-secrecy, it’s also unlikely that a series of “smoking gun” emails will be found in senior executives’ email accounts. How strong a conclusion the investigation comes to, and what the impact on the housebuilding firms will be, remains to be seen."
