KEY POINTS:
The cost of building a small house in parts of New Zealand is 85 per cent higher than in Australian cities, according to a new study.
And that figure climbs to 91 per cent for a large house.
These figures are contained in a report commissioned by the Auckland City Council.
The council's economic and sustainable business committee said it was shocked by the results, which compared the cost per square metre of building materials, labour and contractors' overheads in Auckland and Australia.
Richard Northey, who chairs the committee, said councillors were told it was cheaper to import kitset homes from Queensland than to build them from scratch in New Zealand.
"These issues require further investigation," he said.
It was possible that housing costs were affected by near-monopolies on building materials and overly stringent construction requirements, partly caused by reaction to the leaky homes problem.
"The proportion of families able to realise the classic New Zealand dream of home ownership is dropping dramatically," Mr Northey said.
That was particularly so in Auckland where nearly 40 per cent of people lived in rental accommodation.
"The average price of residential property has risen to about six times the average family income."
The council's report compared Auckland with Sydney, Melbourne and Brisbane. It noted the comparisons were "not perfect" and more detailed work was needed for the full picture.
But it said Auckland building costs rose 65 per cent for a small house and 60 per cent for a large one between July 1999 and July last year. The sharpest rise was in the last three years, and construction costs were "markedly higher" in New Zealand.
The cost of building a house in the Auckland region was between $1388 and $1601 a square metre.
A small house is defined as 145sq m and a large house as 202sq m.
Mr Northey said he would ask the Commerce Commission to investigate monopolistic practices in building material supply.
"Housing is one of our essential basic needs and its cost is one of the most pressing challenges facing Auckland," he said.
"Reserve Bank interest rate rises are not taking the heat out of the housing market because of the almost guaranteed high capital gains."
Mr Northey said possible alternatives were:
* A capital gains tax on all property or on investment property only.
* A ban on house sales to foreigners who lived overseas and rarely came to New Zealand.
* Government controls on prices of building materials, or greater competition in supplying them.
* Requiring a minimum amount of affordable housing in all significant urban developments.
Building and Construction Minister Clayton Cosgrove said last night that the Australia-Auckland comparison was flawed.
He pointed out that the report had said that the New Zealand and Australian handbooks on which the claims were based had different definitions for materials used in construction.
They also had different definitions of house size, so the report was "comparing apples with oranges".
"The Australian and New Zealand economies are vastly different in size and we do not enjoy the huge economies of scale present in Australia," Mr Cosgrove said.
Auckland City Council economic analyst Kerry Craig said the study was an initial investigation.
The study said building compliance costs in New Zealand could not be compared with costs in Australia because of the wide variations caused by the nature of the dwelling and local authorities' requirements and fees.
Consumers' Institute head David Russell said Australia did not require the same standards of construction as New Zealand because it did not have the same earthquake danger.
"So a reasonable chunk in the difference would be taken up with that."
He said a major reason for the increase in the cost of building houses was a shortage of skilled labour.
"That goes right back to the destruction of the apprentice system, which is only now being re-introduced.
"It will be at least five years before we get another flow of skilled people coming on to the market."
He said only a few companies supplied building materials in New Zealand, which was a concern.
Auckland Registered Master Builders' vice-president Andy Gray said the costs of some materials had soared, but it was under control.
He said some builders had work lined up a year ahead, so people were paying more to get preferred builders on the job at the time they wanted them.
"It's crazy to try to put controls on a free market when you can't put your finger on any one cause."
