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Government announces Commerce Commission probe into residential building supplies


The Government has announced that it will launch a new market study into residential building materials, investigating competition in the sector, and whether New Zealanders are paying too much for supplies.

The new study, which will be undertaken by the Commerce Commission, was announced by Minister of Commerce and Consumer Affairs David Clark at a building site in the Wellington suburb of Brooklyn on Sunday.

The study is aimed at investigating a perceived lack of competition within the building sector, and whether New Zealanders are paying above the odds for building materials. The Government has long been suspicious that materials are overpriced and that too few players dominate the market.

The study comes at a challenging time for the sector as sticky supply chains and labour shortage have driven up the costs for both building and building materials

Are New Zealanders paying too much for building materials? A new study by the Commerce Commission will investigate the issue.

KEVIN STENT

Are New Zealanders paying too much for building materials? A new study by the Commerce Commission will investigate the issue.

It is fulfilling a Labour Party election promise made in the lead up to the 2020 election.

“We are delivering this manifesto commitment because good housing underpins a range of social, economic and health outcomes. Therefore, it is critical Kiwis have access to fairly priced building supplies,” Clark said in a statement accompanying the announcement.

The study will consider the industry structure of the building supplies sector; the nature of competition within the sector, including pricing practices or ‘acquisition requirements’ ; and impediments to entry for new players or new innovative practices and ‘green building supplies. The commission will not be limited to considering only those factors.

The commission is required to publish its final report to the Government in December 2022, most likely about nine months before the next general election.

“Understanding any market barriers could play a key role in supporting New Zealanders achieve home ownership, so I’m pleased the Commerce Commission will be getting this work underway.”

Minister for Commerce and Consumer Affairs Dr David Clark announced the new market study into residential building materials and competition in the sector (file photo).

Getty-Images

Minister for Commerce and Consumer Affairs Dr David Clark announced the new market study into residential building materials and competition in the sector (file photo).

The Government views the study as part of the broader work it is doing to combat sharply rising house prices, which have shot by up 23.4 per cent in the past 12 months according to REINZ data.

It is also in the process of overhauling the Resource Management Act by splitting it into three new pieces of legislation. It has also ended interest deductibility for investment properties. Two weeks ago National and Labour also announced a joint policy to make building high density housing easier.

The commission will investigate the factors that may affect competition for the supply and acquisition of key building supplies, including foundations, flooring, roofing, walls and insulation, Clark said.

“There have been long-standing concerns about potential competition issues, particularly due to the highly concentrated nature of some markets in the supply chain,” Clark said.

“We’re looking at how we can lay the foundations for a more competitive building sector,” he said.

This will be the third such market study conducted by the Commerce Commission since Labour re-took the treasury benches in 2017. The first was into petrol prices, delivered in late 2019, and a current one into supermarkets is expected to deliver its final report in March 2022.

Unusually, this new study will commence before the previous study into supermarkets has been completed.

The study into supermarkets produced some radical options for consideration, including the Government potentially splitting up one of the supermarket chains or making changes to vertical integration within the sector.



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