The government department said the construction industry is one of its priority areas, and its decision to undertake a market study reflects the importance of housebuilding to the economy.

It said the study will allow it to consider potential competition and consumer concerns within the market.

The OFT said the study will focus on two principal areas:

• Delivery of housing - whether land which is suitable for development is being effectively brought through to the planning approval stage and whether land with planning permission is being converted effectively into homes.

• Customer satisfaction - the homebuyer's satisfaction with the properties available.

The study will look for ways to improve their experience of buying a new-build home as well as the quality of those homes.

Following the recommendations of the Barker Review of Housing Supply 2004, the OFT has been monitoring the housebuilding market and is concerned that it may not be working well for consumers.

The government department said possible outcomes of a market study include:

• Giving the market a clean bill of health
• Encouraging firms to take voluntary action
• Encouraging an industry code of practice
• Making recommendations to the Government or sector regulators
• Investigation and enforcement action against companies suspected of breaching consumer or competition law
• A market investigation reference to the Competition Commission.

OFT chief executive John Fingleton said: “This is the first in depth examination of competition and consumer issues in new house-building. 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. The study will examine how regulation and competition in the market might work better for both the economy and individual house buyers.”

The study is expected to report back by summer 2008.