Home construction cost survey reaches key milestone

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The Commerce Commission will kick off a three-day conference on the building materials market on Tuesday with the aim of making recommendations it hopes will lower the cost of new homes.

But competition lawyer and 2degrees founder Tex Edwards doubted the watchdog was currently on track to propose reforms that would significantly improve the $19 billion homebuilding industry.

He said groups that might have represented the interests of consumers looking for cheaper housing had not registered to be consulted at the conference.

Trade Minister David Clark commissioned a building materials market survey last year, hoping it would address long-standing concerns that homebuyers were paying too much for materials due to a lack of competition.

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A draft report released by the commission in August recommended measures it said would make it easier for companies to bring new products to market and get them certified.

He also flagged a likely crackdown on controversial volume-based “discounts” offered by big suppliers, including Fletcher Building on its Gib plasterboard, saying they could prevent rival suppliers from getting a foot in the door.

However, the commission refrained from recommending the dismantling of existing companies.

Defenders and critics of big building materials companies will face off in Wellington this week.

KIRK HARGREAVES / Stuff

Defenders and critics of big building materials companies will face off in Wellington this week.

Edwards will attend this week’s conference as a founding member of the Affordable Building Coalition and a spokesperson for Monopoly Watch, which said he was concerned the commission’s draft recommendations would not deliver results.

Other potentially interested parties, including Consumer NZ, Generation Zero, the Housing Foundation and the Kiwisaver Funds, did not give evidence at the conference, which instead appeared intended to be dominated by “incumbent” companies, he said. he declares.

“To make this study a success, the commission must answer the question in its final report as to why it costs $3,500 per square meter to build a social house in New Zealand and it only costs $1,100 to internationally,” Edwards said.

The commission estimated the average cost of building new homes at $2,696 per square metre, based on published data of building permits approved in the March quarter, but provided no international comparison.

Monopoly Watch called on the commission to seek “a peer review” of its proposed decision not to recommend any structural reforms to the industry.

Construction supplier giant Fletcher Building should be forced to sell its Placemakers distribution business and Carter Holt Harvey should be forced to sell Carters, Edwards said.

Commerce Commission Chair Anna Rawlings said in August that the commission “did not find that vertical integration significantly affected competition at the supply or dealer level.”

Edwards questioned this and suggested that vertical integration would become a more obvious problem if the use of other alternative and potentially anti-competitive practices in the industry, such as volume-based discounts, were eradicated.

Self-proclaimed competition advocate Tex Edwards expects to be a little lonely at the commission's three-day conference, which he says will be dominated by

David White / Stuff

Self-proclaimed competition advocate Tex Edwards expects to be a little lonely at the commission’s three-day conference, which he says will be dominated by “incumbents”.

ITM, which operates a franchise of 91 hardware stores, is also expected to challenge some of the commission’s interim findings at the conference.

As a franchise serving independent stores, ITM stands to benefit from volume-based discounts offered by suppliers and he urged the commission “not to throw the baby out with the bathwater”.

But he said he was surprised by the committee’s draft finding that vertical integration was not a problem, saying the past 18 months had provided “a concrete example where our individual sole traders have encountered difficulties and important relationships with vertically integrated players”.

He said Carter Holt Harvey stopped supplying lumber to ITM stores when it was in short supply and “instead preferred supply to the two verticals – Carters and PlaceMakers”.

“ITM stores that have been loyal to Carter Holt Harvey for over 20 years have been told they will lose their entire wood supply overnight. Communications were generally by telephone only, nothing was put in writing, and no negotiations were willing to be entered into by Carter Holt Harvey.

The commission reported in March that it was reviewing the matter.

Monopoly Watch said the commission’s draft report, together with its previous market research into the supermarket and fuel sectors, “illustrates the need to restructure and reform the Commerce Commission.”

“Such is the volume of broken markets in New Zealand … that a structurally reformed commission is needed to address these issues,” he said.

Edwards said the few million dollars the commission would spend on the market was good value given the market was one of the “worst economic performers” in the country, but needed to act more than a one-time job.

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