(Reuters) -Britain’s competition regulator plans to propose a deeper probe into the large amount of land controlled by top homebuilders and into high charges arising from difficulties in handing over completed housing estates to local authorities for upkeep.
The Competition and Markets Authority’s (CMA) proposal, announced on Friday, to make a so-called market investigation reference comes after a roughly six-month study on homebuilders in response to concerns that they were not delivering homes at an adequate pace or scale.
Some of Britain’s biggest homebuilders by revenue include London-listed Barratt Developments, Taylor Wimpey, Persimmon and Bellway.
The CMA’s proposal turns up the heat on British homebuilders already under pressure from a significant slowdown in demand, as high mortgage rates drive buyers away and force companies to slash building targets and profit forecasts.
The regulator has identified five areas of concern, including estate management charges and land banks, to be probed further in the next phase of its study.
It said evidence shows a significant number of new housing estates – planned residential areas with homes and public amenities – built over the last five years have not been taken on by their local authority.
This has raised concerns about hefty charges to be paid by owners as the responsibility for maintenance of roads, parks and street lighting in their housing estates is “passed on to private companies that may have significant market power”, the CMA said.
The regulator also highlighted the large amount of developable land controlled by the biggest housebuilders, saying it has heard concerns from some stakeholders this may be limiting competition or slowing build-out rates in some areas.
However, the CMA’s market study has found that the housebuilding market does not appear to be particularly concentrated on the national level, with a number of large housebuilders competing alongside smaller, regional firms.
“We’ll press on with our investigation … so that we can get to the bottom of any potential competition concerns,” CMA CEO Sarah Cardell said in a statement.
The regulator said it would provide an update on its work in the autumn and consider a range of options to address the issues identified, including recommending legislative changes.
The UK housebuilders’ index has fallen nearly 12% in the last 12 months. It was down marginally in Friday morning trade.
(Reporting by Aby Jose Koilparambil, Eva Mathews and Yadarisa Shabong in Bengaluru; Editing by Sherry Jacob-Phillips and Devika Syamnath)