Competition in any industry is what keeps it alive and moving forward. Without it, there would be no need for innovation and keen pricing, and customers would be left with little choice in the face of shoddy service and products. The mortgage industry is in no doubt about this, with fierce competition over products, rates and criteria raging on, keeping lenders on their toes. No one wants to be left behind as their competitors stroll off into the distance with their business.
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With this is mind, the Office of Fair Trading (OFT) has turned its beady eye on the £20 billion per year house building market over concerns that it may not be working in the best interests of consumers or delivering the quality people need and want. The construction industry is one of the OFT’s priority areas and, following the Barker Review into the housing supply in 2004 that called on the industry to increase levels of customer satisfaction, it has kept a close watch on the market.
Focusing the stare
The OFT has deemed that the house building industry has not seen a substantial improvement in the last three years and now, in what it purports to be the first study of its kind, it intends to take an in-depth look into potential competition and consumer concerns.
John Fingleton, chief executive of the OFT, says: “This is a hugely important market for the economy because of its substantial economic impact and because unresponsive housing supply hinders labour mobility, constrains economic growth, and harms consumers. Furthermore, for individual house buyers, even low levels of dissatisfaction can translate into very high detriment. The study will examine how regulation and competition in the market might work better for both the economy and individual house buyers.”
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The main areas of focus for the OFT will involve the delivery of housing, such as whether land suitable for development is being effectively brought through planning approval and whether land with planning permission is being converted effectively into homes that homebuyers are satisfied with; and how to improve the experience of buying a new build home along with the quality of these properties. The study will not look into where development should occur or the environmental impact of new homes.
Too big an issue
However, Colin Snowdon, chief executive at Wave, feels the OFT should have no involvement in the planning process and should purely be looking at the issue of quality for consumers. For Snowdon, the issue of house supply is too big to be confined to the OFT. He explains: “As a country, we are building far too few houses. In the 1950s, 300,000 homes were being built per year and we need to be building at least 250,000 per year now. We need to solve the supply side and this warrants a broader and more powerful review of the issue.
“As a nation, we need to have a consensus of the need to build more houses. People bleat on about rising house prices and young people being disenfranchised, but we won’t solve it until we have a root review. There is a big backlog of houses and for years there have been too few built. This issue needs a concerted effort at the highest level of government.”
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Yet, David Hollingworth, head of communications at London and Country, comments that trying to resolve the issue of making more housing available is one that needs to start somewhere. He says: “Affordable housing is a hot topic and Prime Minister-in-waiting Gordon Brown is keeping it top of his agenda. Part of that is the delivery of housing and how to deliver new housing to the market, which is going to be vital if we’re going to see it become more available. I’m sure people will look at what the OFT comes up with and whether that sparks further and closer look at the elements we will have to wait and see. The fact something is being done is a positive.”
Quantity counts
Hollingworth adds that building more homes is just one side of the story, as the quality of those properties is just as important. “It’s not just about building more homes. Look at how many concrete monstrosities we see being knocked down after just 30 years. There is more to it than just throwing up houses. This is just the early stages of the review, so who knows what it will come up with.”
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We’ll all have to wait until Summer 2008 to find out what conclusions and recommendations the OFT comes to regarding the house building market. No doubt in that time much more will be said as to how to solve the problem of the affordable housing shortage in and out of government. Yet, it should be remembered by those in power that having the quality of housing going up is just as important to people as having a home in the first place. A topic that is so important to our economy deserves to be talked about at length, for there is no simple way to solve it.
