It will also examine customer satisfaction and planning issues and how regulation and competition might work more effectively. The number of homes built each year has declined in most of the last 15 years, while the number of households has continued to grow.

The investigation is being undertaken after the Barker Review of Housing Supply in 2004 recommended that there should be a relaxation of planning rules to allow the building of more affordable homes.

Since then the OFT has been monitoring the housebuilding market and says it is concerned that it may not be working well for consumers. The review could result in the sector being referred to the Competition Commission if there is evidence of companies deliberately building fewer homes to keep prices high.

Part of the reasons for the review is the industry has failed to draw up its only voluntary code of conduct.  

The OFT chief executive John Fingleton said: "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 not look at the overall question of where development should occur or the environmental impact of new homes.