KIRK HARGREAVES/Stuff
Building materials are an estimated 20% of total residential building costs.
On Thursday the Commerce Commission releases its draft report into whether New Zealand’s residential building supplies market is as competitive as it should be.
The consumer watchdog has been investigating since November 2021 in its third market study since Parliament passed a law in 2018 giving it the power to shine a light on certain sectors.
It finished a market study into supermarkets and the retail grocery sector in March, and in 2019 delivered its report on competition in the retail fuel market.
This report is expected to go beyond the headline-grabbing shortage of plasterboard in a market dominated by Fletcher Building’s Gib board, but what exactly will we find out?
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What can we expect to see tomorrow?
The commission will release its preliminary findings about whether competition is working in the residential building supplies market.
We will also be told its early recommendations, if it has any, on how to make the industry more competitive.
It will seek feedback and then publish its final report on December 6.
STUFF
Commerce Commission’s 2020 list of most complained about industries reflects the impact of the Covid-19 pandemic. (First published November 2020)
What has prompted this market study – are we being ripped off over building supplies?
Construction costs are rising at a record pace, due to a range of factors, according to CoreLogic.
When the study was announced in November, Minister of Commerce and Consumer Affairs David Clark said New Zealand had “an incredibly concentrated market” in building supplies, which are an estimated 20% of overall residential building costs.
Having a market dominated by few suppliers reduces our choices and increases the likelihood we are paying too much.
What specifically is the study zeroing in on? Is it all about Gib?
There has been a lot of talk about Gib board, made in New Zealand by Fletcher Building subsidiary Winstone Wallboards, but the market study is looking at much more than that.
Clark asked the commission to investigate competition in building products used for the major parts of residential buildings – foundation, flooring, roof, interior and exterior walls, and insulation.
Windows are included, but not electrical and plumbing products.
But going back to Gib, competition advocate and 2degrees founder Tex Edwards indicated in a submission to the study that the “plasterboard crisis” was a symptom of the bigger problem, a “regulatory train smash, where a failure and a game to preserve a long-held monopoly inflicts pain and destroys small businesses”.
Are there likely to be particular businesses under scrutiny?
Yes. Fletcher Building and Carter Holt Harvey are two big players expected to come under the spotlight.
Fletcher Building is active in wholesale supply, distribution through its Placemakers building supplies stores, and residential construction.
It produces insulation, plasterboard, steel products, laminate surfaces and plastic and concrete piping. Its businesses include Laminex New Zealand, Tasman Insulation, and Humes.
Carter Holt Harvey is active in wholesale supply, and distribution through its Carters stores. It produces timber, laminated veneer lumber, plywood and other building products.
Aren’t these market studies just a case of the Commerce Commission brandishing a big, wet bus ticket?
Possibly. The commission’s report on supermarkets was criticised for not going far enough and shoppers looked unlikely to get an immediate drop in prices.
As with the groceries study, the Government could go further than the commission’s recommendations. At the very least, it would provide critics with some evidence to prod the Government into more action if needed.
I’m planning a building project – should I hold off and wait for this to drive prices down?
Probably not.
The problems won’t be solved overnight, and some are beyond the scope of the commission’s study, including labour costs. Also, the sheer rate of acceleration in construction costs is unlikely to come to a screeching halt.
Of course, going ahead with a project would depend on actually being able to find a builder, and all the materials you need, which are not a given these days.
