Housing Minister Nick Smith says the cost of building homes is too high and is affecting the level of the country's affordable housing.
A new paper prepared by the Ministry of Business, Innovation & Employment says house building costs are 30% higher in New Zealand than Australia.
The paper says the residential construction sector is a poor performer, with productivity growth lagging behind other sectors.
Nick Smith says the cost of building materials is one of the reasons and the Government wants to create a more competitive building market, and will analyse the costs in many areas of the housebuilding process.
"We need to deal with the issues of land supply, issues of infrastructure costs, of compliance costs as well as these issues associated with building products and productivity within the construction industry."
Dr Smith says the Government wants to help the industry become more competitive, but there are many questions that need answering such as whether there is sufficient competition and whether there are particular market tools that inhibit competition.
Building Research Association chief executive and Construction Industry Council chairperson Pieter Burghout says the Government needs to focus on the high price of land.
He says the cost of land in other countries is usually one quarter to one third of the overall build price, but in New Zealand it is well over that - and sometimes 40% or even 50% of the total price.
The Government is calling for submissions on the new paper, for a report to go to Cabinet later this year.
Dr Smith says the work will tie in with the Auckland Housing Accord announced on Friday, which also will examine materials, construction and compliance costs.
