The Office of Fair Trading has launched an investigation into the United Kingdom’s £20 billion housebuilding industry amid concerns over both the quality and time taken to build the country’s housing stock.

The investigation will examine any evidence of cartel-like behaviour that may restrict the supply of new homes and fuel house-price rises, although OFT inspectors insist that they are approaching the inquiry with “no assumptions”.

Research from the Royal Town Planning Institute shows that the nine largest residential developers have enough land with planning permission to build almost 225,000 homes. That is more than double the number of houses they build annually.

Government figures show that the number of annual housing starts in England for all housebuilders fell to 174,060 a two-and-a-half year low at the end of March. Building completions last year totalled 160,234.

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The Government has just launched a planning White Paper that aims to reduce the time it takes for developers to gain detailed planning permission.

Builders sometimes have to wait up to two years from the submission of an application until permission is granted.

However, the OFT will re- examine both this aspect of the planning process and, for the first time, the process for starting building work once planning is in place.

Simon Nichols, the OFT’s senior team leader in charge of the investigation, said: “We don’t have assumptions at the moment that there is any sort of collusive behaviour. What we see is weak supply and an increase in demand and wonder why that is.

“We are looking at the way that land which is suitable for development is brought through the planning system to the point where it gains planning permission and then look at how that land is converted into homes.”

John Slaughter, director of external affairs for the House Building Federation, whose 300 members account for about 80 per cent of the industry, said he was “puzzled” by the investigation. “We have been calling for the efficiency of the planning system,” he said.

The Callcutt report, a government-backed investigation into housing supply will be published in the autumn. It is believed that it will reveal that, for 97 per cent of housing sites, construction work starts within three months of the grant of planning permission.

The OFT will also examine customer satisfaction. A survey from the Housing Forum, published in the Government’s Barker review of housing supply, showed that 83 per cent of new home buyers were satisfied with their purchases in 2003.

The HBF’s own MORI-validated survey showed customer satisfaction levels of 77 per cent in 2007, up from 76 per cent in 2006.

The OFT’s investigation could result in a number of outcomes ranging from encouraging firms to take voluntary action and publishing information to help consumers to a market investigation reference to the Competition Commission.

John Fingleton, chief executiv of the OFT, said: “This is the first in-depth examination of competition and consumer issues in new housebuilding.”

Britain’s housebuilding industry is dominated by Barratt Developments, Persimmon and Taylor Wimpey, the proposed merger of Taylor Woodrow and George Wimpey. Together they account for about 60,000 new home sales each year.

A spokesman for Barratt said: “As a volume housebuilder, Mark Clare, the chief executive, has made it clear that increasing our production is central to our growth plans. There are, however, a number of bottlenecks in the system, most importantly the availability of land and the complexity and speed of the planning process.

“Whatever the inquiry can do to tackle the issues and bring forward a greater supply of homes will be welcomed by housebuilders and house buyers alike.”

David Orr, the chief executive of the National Housing Federation, an umbrella group promoting the interests of housing associations, said: “The OFT should explore penalties for developers who receive planning permission only to sit on the land for an unreasonable amount of time.”

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