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New Zealand Plans Inquiry Into Home Building Costs, Competition

New Zealand will conduct an inquiry into residential construction in an effort to lower building costs and increase productivity and competition.

The Pacific nation’s government commissioned the study to identify ways to boost housing affordability, the Ministry of Business, Innovation and Employment, which is conducting the inquiry, said in an e-mailed document.

Home-building approvals in March fell 5.4 percent, missing economists’ estimates for a gain of 2 percent, while house prices in April rose 7.1 percent from a year earlier, the biggest gain since early 2008. The Reserve Bank of New Zealand doesn’t want to see financial or price stability in the country compromised by housing demand getting too far ahead of supply, Governor Graeme Wheeler said April 24.

“There’s significant concern that items, likes of Batts, likes of Gib, likes of concrete, across the board are more expensive than what they are in Australia,” Housing Minister Nick Smith said, according to an e-mailed transcript of his comments on TV3’s “The Nation” program today. “We don’t see good reason for us not being able to be more competitive.”

Pink Batts and Fat Batts are insulation materials made by Fletcher Building Ltd., New Zealand’s biggest manufacturer of construction products, and Gib is a brand of plasterboard made by the company.

Entry Barriers

The study will consider barriers to entry including natural ones associated with technology and resources, regulatory hurdles, and strategic barriers which include steps taken by an existing company to prevent or reduce competition, the ministry said in the document. It will also look at whether there’s “workable competition,” including on price, quality or customization of goods and services, it said.

“The competition work focuses on potential barriers to effective competition within the building materials and services market, while the productivity work focuses on factors to improve the overall productivity of the residential construction sector,” Commerce Minister Craig Foss said in an e-mailed statement.

Information for the study will come from a Productivity Commission report released last month, other research, public submissions and interviews with market participants, according to the ministry document. Submissions will be accepted until June 10, it said. The results of the study could include changes to government regulations or practices and improved transparency, it said.

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