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Watchdog sinks its teeth into the housebuilders

At last an investigation by the competition watchdog with more bite than bark as it probes potential mis-selling by big housebuilders

Houses under the microscope
Major housebuilders are accused of misleading leasehold buyers

Here’s something you don’t see very often these days: no, not commuters, and not our Prime Minister showing real leadership. Those things will have to wait, the latter perhaps forever.

Still, this is almost as rare: an investigation from the Competition and Markets Authority that might have legs, or at least one that real people actually care about. A potential mis-selling scandal in the housebuilding industry is something to take seriously, unlike some of the watchdog’s recent probes.

Its laughable decision to get in a tizz about JD Sports’s takeover of Footasylum, a chain with less than 5pc of the market, that was heading for the great trainer emporium in the sky, obviously gets a special mention.

After all, that was apparently deemed to be of far more concern than the vast influence that Nike and Adidas exert over the market.

And, even when it alights on the right target, there’s always a chance that the watchdog will get it wrong anyway. Witness the double about-turn that resulted in Amazon being allowed to invest in Deliveroo even though the regulator conceded it was wrong to say the delivery firm would go under without the tech giant’s backing.

But hey, why not wave it through anyway and allow Amazon to get its teeth into another fast-growing sector through the backdoor?

A proper investigation into the big housebuilders offers the chance for the blundering CMA to salvage its reputation. It is an industry that is fully deserving of further scrutiny.

No other sector of the economy has had it quite so good over the last decade. House-building is similar to high street banking in that everyone is making fantastic money, much of it on the back of generous taxpayer support.

Fuelled by the government’s Help to Buy scheme, housebuilders have been generating bigger profits ever year, sending share prices through the roof, and funding massive payouts to investors, as well as top bosses, like the outrageous £75m bonus for Persimmon’s Jeff Fairburn for selling a few thousand bog-standard, box-cutter homes every year.

This week, Barratt Homes, one of those named in the CMA’s dossier of wrongdoing, revealed it was still able to make margins of more than 14pc even at the height of the Covid crisis. The Chancellor’s stamp duty holiday, together with the coronavirus mortgage payment holiday, will prolong the party.

And yet despite this extraordinary decade-long bonanza built on the back of massive state subsidies, if the CMA is right, customers are being taken for mugs left, right and centre.

Indeed, it was already clear from the independent probe that Persimmon sanctioned into its own practices in the wake of the bonus storm, that buyers were being shortchanged.The review found poor quality workmanship and accused the firm of putting profit before customers.

The CMA has rightly zeroed-in on the sale of leasehold properties, an area that consumer campaign groups have nicknamed “fleecehold” and described as the next PPI scandal. It claims to have uncovered “troubling evidence” that buyers have either ended up paying huge sums in ground rents or to buy the freehold for their home at a later date.

Four of the big housebuilders: Persimmon, Barratt, Countryside, and Taylor Wimpey are in its sights, though the watchdog is careful to point out that they aren’t necessarily guilty of malpractice.

Still, it raises an important wider point: there will always be examples of sharp practices in business, but you would expect to find them in the sectors that are struggling. Instead, here is in an industry that has never had it better and yet it would appear that customers are routinely being taken for a ride.

Perhaps the lesson is that people are people and they will always try to pull a fast one, regardless of how much money they are making. Either way, the regulator is finally onto something.

Hollow talk

Rescues come in various forms. Just ask the good folk at Virgin Atlantic. Fresh from a £1.2bn restructuring to save Sir Richard Branson’s airline from the brink of collapse, it will axe half the 10,000-strong workforce.

Yet, as boss Shai Weiss acknowledges, survival has been made possible by the “sacrifices of so many”. What a hollow thank you.