4 Aug 2022

Building supply market: Report a clear signal for sector to 'think about their behaviour' - Clark

1:26 pm on 4 August 2022

The government is promising more action on tackling high prices for residential building materials, but says more detailed work still has to be done.

Watch Minister Megan Woods and Minister David Clark speaking here:

The Commerce Commission today released the draft findings of a study into New Zealand's residential building supplies market, as the cost of building or renovating a house goes through the roof.

It said competition for the supply of key building products was not working well as it could.

"Our preliminary view is that competition for the supply of key building supplies is not working as well as it could, and would be improved if it was easier for building products to be introduced and for competing suppliers to expand their business," Commerce Commission chair Anna Rawlings said.

The study found that "tried and tested" products had become embedded in the country's building practices and that this was compounded by rebates paid to merchants by some suppliers.

Minister of Building and Construction Megan Woods and Minister of Commerce and Consumer Affairs David Clark spoke to media after the report's release.

Woods said it was an invaluable piece of work and an important stepping stone.

The market study was initiated because the government had a sense consumers were paying too much for building supplies in New Zealand, she said.

"Everybody has known that there are some practices that are leading to the fact that in New Zealand building supplies can be up to four times the price that they are in other markets.

"I think what this report has uncovered and done the detailed work around [is] what some of those specific practices [are]. They are and bring them together in one place and we consider a range of options around it."

Clark said market studies were there to help improve consumer outcomes.

"We know from market studies we've done so far that they have an immediate impact through shining some light on what's going on in the sector in question.

"Ultimately what we've asked them to do is look at the structure of competition in the market."

Woods said the issue of competition was one that came through really clearly in the draft recommendations.

The report laid bare some of the practices that could be contributing, undoubtedly, to why it was so difficult for new entrants to enter the market, she said.

"We are absolutely open that there may need to be some areas of regulatory reform but I think as the report points to, some of it is around practice."

There were clear signals for people in the sector to "think about their behaviour, to review their behaviour explicitly in some cases" ahead of, for example, the section 36 law changes coming into force, Clark said.

The government welcomed all draft recommendations, Woods said.

She said there was a very clear process for a Commerce Commission market study.

"It would not be appropriate for the government to say this is the action we're going to take. This is a stepping stone, it is a partially completed process but I think this has signalled some really useful pathways for inquiry."

But she said the government wouldn't be thinking about an etiquette of process "if there's something really obvious in front of us that we should and could be doing".

Chronic shortages may not be addressed by report - industry

Builders and tradespeople say the report into the building supplies market may not lead to the meaningful change people are calling for.

CBS Co-operative chairperson Carl Taylor leads an organisation representing 900 builders and tradies.

He said chronic shortages in plasterboard and timber may not be addressed by the report.

"It's kind of a little too late to be honest. It's not really telling us anything we didn't already know," Taylor said.

Taylor said getting a range of products into the market would continue to be a struggle.

"They have identified that they do need to make it easier for competition to enter the market, so that's certainly a positive.

"Whether that happens or not, time will tell."

He said the CBS Co-operative would make a submission to the Commerce Commission's draft report to get its views heard.

Meanwhile, the country's biggest supplier Fletcher Building said it was currently digesting the details of the report.

A final version of the findings would be published in December.

Get the RNZ app

for ad-free news and current affairs