Residential sector not working as well as it could be

In its just released draft report into the state of the building supplies market. The commission says regulatory systems are hampering competition and the market is not working as well as it could.

It says quantity focused rebates, restrictive land covenants and exclusive leased are part of the sector not working well.

Commission chairwoman Anna Rawlings is recommending competition be an objective to be promoted in the building regulatory sector.

Its solution to the lack of competition is improving the conditions of entry for competitors.

This would include new compliance pathways for a broader range of key building supplies as there are too few competing suppliers for many categories of products and competition at the supplier lever is limited to some key players.

The commission wants a Maori world view reflected, an examination to be made into removing impediments to substitution and variations an investigation into whether the barriers to certification and appraisal of building products could be reduced.

A new register has been established to share information about building products and consenting to help centralise the knowledge.

On rebates, the commission encouraged builders to invoice their clients at the true price they paid for the goods and be truthful about what they were paying.

It found loyalty to Winstone Wallboards and its Gib product which has about a 94% market share, is likely a result of its level of service, the quality of Gib and comparative prices, regulatory barriers for competitors to come into the market and until recently import duties on plasterboard.

The biggest giants in the building supplies market – Fletcher Building and Carter Holt Harvey – disputed the commission’s house price probe.

The Productivity Commission estaimated New Zealanders pay between 20-30% more for building materials than those in Australia. Prices rose 16% in the last three months of last year and a further 12% rise is being predicted for the second half of this year.

The building companies have been defensive about these figures and Fletcher Building Ross Taylor told the commission materials were only a small part of overall house prices.

Taylor says building materials comprise only 19% of the residential development of a typical two-storey house in Auckland.

Building and Construction and Commerce Minster Megan Woods and Commerce and Consumers Affairs Minister David Clark says New Zealand is facing the same global cost of living and inflation pressures as other countries and it is just not acceptable that such an important sector is not working as well as it could be.

“With good, affordable housing underpinning  so many other social, economic and health outcomes, and given population growth and an increase in building consents over the past decade, it’s vital consumers get the best deal,” Woods says.