Britain’s housebuilding industry is to be the subject of a competition watchdog investigation.

The Office of Fair Trading announced this morning that it is to launch a study into the £20bn sector to explore housing supply and customer satisfaction levels with house-builders.

The OFT is reacting to the 2004 Barker Review of Housing Supply, which concluded that a shortage of land with planning permission is pushing up house prices to sky-high levels.

The investigation comes as concern mounts that few people can now afford to get on the housing ladder in the south-east, posing a threat to public services.

It also follows claims from bodies like the Royal Town Planning Institute that house-builders are sitting on land banks to force up house prices by choking off supply.

On top of this, some lobbyists believe that a spate of consolidation in the house-builder sector, with Wimpey merging with Taylor Woodrow and Barratt buying Wilson Bowden, will lead to even less homes being built.

OFT chief executive John Fingleton said: `The study will examine how regulation and competition in the market might work better for both the economy and individual house buyers.’