Commerce Commission chair Anna Rawlings during the release of their final report into the residential building supplies market. Video / NZ Herald
The Government will more closely monitor prices and competition in the house-building supplies sector and Crown agencies will use more offsite manufacturing to improve productivity and competition.
Building and Construction Minister Megan Woods and Commerce and Consumer Affairs Minister Duncan Webb today responded to the Commerce Commission’s investigation into residentialbuilding material competition after last year’s probe.
Revealing more prices of key building supplies, doing more work on guiding and supporting builders and councils on using alternative products and driving more offsite manufacturing of new houses are key actions announced today.
After an August draft and a December final report, the two ministers announced what the Government plans to do.
“The commission’s findings that competition in the building supplies market is not working as well as it could lines up with what we have heard from those working in the sector,” Woods said.
“This has to change. We need to remove market barriers that make it hard to introduce new building products and for competing suppliers to expand their businesses. This drives up costs and means homeowners end up paying more than they should. At a time when the cost of living is hurting families, that needs to improve,” she said today.
A review into restrictive land covenants is also planned - just like in the supermarket sector.
“These types of land agreements can be used in a way that makes it harder for new businesses to enter a market, or for existing businesses to expand, and that can impact on competition. We have seen this in three markets now – building supplies, retail fuel and groceries,” Webb said.
Megan Woods announced the Government's response with Duncan Webb. Photo / NZME
“Time and time again, land covenants have come up. Competition is a driver of lower prices and better quality – good for businesses and consumers. Now we’re going to look across the whole economy at how these agreements are being used and whether changes need to be made to level the playing field for new businesses.”
The commission recommended establishing a national building products register to improve decision-making and removing impediments for product substitution so cheaper products could be imported or used.
Fletcher Building’s 94 per cent share of New Zealand’s wallboard market via subsidiary Winstone Wallboards has often been cited as an example of poor sector competition.
The watchdog found last year the house-building sector not working as well as it could if it was easier for new building products to be used and for competing suppliers to expand.
The commission made a suite of recommendations to increase competition for key building supplies, without undermining the essential policy objectives of the building regulatory system.
The building regulatory system continues to incentivise designers, builders and building consent authorities to favour familiar building products over new or competing products, the final report out in December found.
Last August, there were sighs of relief as industry players greeted the initial report of what could have been a hard-hitting probe into the competitiveness of our market for house-building materials.
One construction sector chief wants the Government to axe Fletcher Building’s 94 per cent hold on the plasterboard market, saying it was wrong that it ever got to that. Shane Brealey, managing director of builder/developer Simplicity Living, said Winstone Wallboards should never have become so dominant.
Shane Brealey says taskforce is making good progress.
Industry reaction to the draft Commerce Commission report on residential building material competition reported on August 4 was surprisingly approval rather than criticism, fear or loathing.
That’s great for business, perhaps not so good for consumers - a point made by National’s then-construction spokesman Andrew Bayly who said at the time the recommendations are too meek.
Grant Swanepoel, Jarden’s equity research director, said the probe would have little effect on the dominant business Fletcher Building.
“Our view is that the report’s findings and recommendations are very benign, with the commission making general recommendations that could improve access to markets over time, more driven by regulatory changes than by forced short-term changes,” Swanepoel said in early August last year.
Fletcher Building was non-committal late last year.
“Fletcher Building acknowledges the release of the Commerce Commission’s interim market study into residential building supplies. The report is comprehensive and requires a thorough review. We will take our time to consider the points made by the Commerce Commission and continue to participate in the process accordingly,” a spokesperson said last August.
David Kelly, Master Builders’ chief executive, welcomed the centre for excellence but called for faster, more deliberate action from the watchdog.
The commission stopped short of recommending breaking up any businesses in the sector, saying “vertical integration” of businesses in the industry did not appear to be a factor affecting competition over the longer term.
