Developers absolved by watchdog over 'land banking'

The Government's consumer watchdog has concluded that there is no evidence that the development industry has engaged in 'land banking' to the detriment of competition.

The Office of Fair Trading's market study into homebuilding said there was little or no substance to the claims that house builders were either land 'hoarding' or withholding land with planning permission to drive up prices.

The OFT said that 'land banking' reflected the need for firms to have a pipeline of land at different stages in the development process.

The OFT report said: "We have not found evidence that homebuilders have the ability to anti-competitively hoard land or own a large amount of land with planning permission on which they have not started to build."

In fact, the report noted that apart from developers "the largest land bank may be that held by the public sector".

The OFT concluded that "competition has not been impaired by homebuilders mothballing permissioned land to create a barrier to entry and artificially raise prices even during the long upturn in the market until 2007. Equally there is little evidence to suggest that homebuilders have been able to systematically obtain market power at a local level by acquiring planning permissions".

Read the Office of Fair Trading press release.

Roger Milne

25 September 2008