Commerce Commission reviewing high cost of residential building materials

Leah Panapa 22/11/2021

LISTEN: The government wants to see if Kiwis are being ripped off by the cost of building supplies and has launched a review.

The Commerce Commission will look at the high cost of building materials for the residential market.

Even before the latest bout of inflation, the cost of building materials has been a longtime concern in New Zealand.

The Productivity Commission estimated people in New Zealand pay between 20 and 30 percent more for building materials than those in Australia.

Mike Blackburn, the co-founder of Combined Building Supplies, says we are currently building more houses than ever in New Zealand's history.

"This year we're likely to see something like 48 to maybe 50 thousand new houses under construction," he told Magic Talk.

"That puts the entire industry under pressure."

Supply lines have also been challenged by the COVID-19 pandemic.

Blackburn says freight costs for importing materials is one of the significant reasons for the increase in building supply costs.

"I'm having people telling me pre-COVID they could land a container here in New Zealand for somewhere between two and three thousand dollars, now it's costing them 12 to as much as 15 thousand dollars.

"The merchants pass those costs onto the builder and of course the builder has no option but to pass those costs onto the homeowner," he told Magic Talk.

Minister of Commerce and Consumer Affairs David Clark says there have been long-standing concerns about whether there is enough competition in the sector.

The commission will consider a range of issues including the following:

  • The industry structure for key building supplies covered by this study
  • The nature of competition for these key building supplies, including any industry pricing practices or acquisition requirements that impact on competition
  • Impediments to the entry or expansion of new or innovative building supplies, such as 'green' building supplies or novel prefabricated products.

The Commerce Commission will present its final report on the issue in December 2022.

Listen to the full interview with Mike Blackburn above.

Magic Talk | Mornings with Leah Panapa, weekdays from 9am

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