Britain's housebuilding market has fundamental problems that are preventing more homes being built, the competition regulator said on Monday, weighing into one of the key battlefronts of an election expected this year.

The Competition and Markets Authority (CMA) also said it was starting an investigation into eight of Britain's largest housebuilders to see whether any commercially sensitive information was being shared among the companies and if that was weakening competition.

The companies include Barratt, Bellway, Berkeley, Bloor Homes, Persimmon, Redrow , Taylor Wimpey and Vistry.

"Housebuilding in Great Britain needs significant intervention so that enough good quality homes are delivered in the places that people need them," CMA Chief Executive Sarah Cardell said in a statement.

Housing has long been a contentious area for Prime Minister Rishi Sunak's governing Conservative Party. Some of its lawmakers in rural areas do not want to see an increase in building while those in more urban regions want more homes built quickly.

The government says it is on track to deliver 1 million new homes by the next election, but it is not expected to deliver another promise to build 300,000 net new homes per year in England by the mid-2020s, largely because of uncertainty over planning policy reform.

The CMA concluded, following a year-long market study, that a complex and unpredictable planning system as well as speculative housebuilding was causing a persistent shortfall of homes.

Less than 250,000 homes were built across England, Wales and Scotland last year, well short of the government's annual targets, the CMA said.

Britain's opposition Labour Party, expected to beat Sunak's Conservatives in an election that must be held by January 2025, has vowed to reform the planning system to improve housebuilding rates, including in rural areas as appropriate.

The CMA said that while the potential anti-competitive behaviour by housebuilders was not the main driver of the problems in the market, it was concerned that any such behaviour could be weakening competition and influencing new house prices. (Reporting by Aby Jose Koilparambil in Bengaluru and Sachin Ravikumar in London; Editing by Varun H K, Dhanya Ann Thoppil and Kate Holton)