New build homes

In a significant development for property professionals, the Competition and Markets Authority (CMA) has recently announced that it will delve into five key aspects of the housebuilding market as part of its ongoing sector study initiated in February 2023. The areas of concern included estate management charges, land banks, planning rules, competition between builders, and barriers faced by new businesses aiming to enter the home construction market. We will go through the issues within each of these areas here.

1. Land Banks and Competition

One of the key issues identified by the CMA is the dominance of large housebuilders in holding extensive land banks. Concerns have arisen that these land holdings may be restricting competition or causing delays in construction in certain regions. This focus on land banks highlights the importance of a steady supply of developable land, as delays in acquiring planning consent can threaten the viability of businesses in the industry.

2. Planning Rules and Uncertainty

The CMA has also highlighted the complexity of planning rules and the uncertainty in decision-making processes as hurdles to the timely delivery of new homes, particularly for smaller housebuilders. This complexity can hinder investment and growth in the sector, making it challenging for smaller players to thrive.

3. Competition Assessment

At a national level, the CMA’s market study did not find a high level of concentration in the housebuilding market, with both large and smaller, regional firms in competition. However, the focus now shifts to examining competition at the local level and assessing whether small and medium-sized housebuilders can effectively compete in these regional markets.

4. Barriers for SMEs

The CMA’s study also encompasses an examination of the barriers encountered by small and medium-sized enterprises (SMEs) interested in entering the home construction sector. The hurdles they face, including the planning process’s complexity and cost, its unpredictability, and changing regulations, may make investment and growth challenging.

5. Estate Management Charges

Estate management charges have become a point of concern, especially for homeowners in new housing estates built in the last five years. A significant number of these developments have not been adopted by local authorities, leaving residents responsible for paying private management companies to maintain amenities like roads, parks, and street lighting. The CMA’s scrutiny here is driven by worries about high or unregulated charges and the quality of maintenance provided.

The Home Builders Federation (HBF) Response

The Home Builders Federation has responded to the CMA’s investigation with optimism. It views this study as a unique opportunity to evaluate the housebuilding market in a non-political environment. The HBF particularly emphasised the difficulties faced by SMEs, who struggle with the complexities, costs, and uncertainties of the planning process. It also recognised the importance of land as a raw material for developers and the need for a steady source of potential development opportunities.

Furthermore, the HBF supports the CMA’s attention to estate management charges and the changing landscape of public infrastructure maintenance. As local authority resources dwindle, new approaches are needed to ensure the long-term upkeep of these essential amenities.

The CMA’s ongoing study into the housebuilding market is a significant development for property professionals and stakeholders in the industry. The focus on land banks, planning rules, competition, and barriers for SMEs reflects the need for a more transparent and competitive environment in the sector.

The examination of estate management charges addresses homeowners’ concerns about costs and quality. The consultation closed on 18th September. The outcomes of this study could pave the way for important reforms that benefit both the industry and homeowners. Property professionals should stay tuned for further developments in this crucial sector.

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