New Zealand Seeks Lower Building Costs Through More Competition

Tracy Withers, Bloomberg News

(Bloomberg) -- New Zealand plans to curb soaring prices in the building industry by increasing competition and making it easier for new and alternative products to enter the market.

The government signaled its willingness to act on the recommendations of a Commerce Commission report into residential building supplies published Tuesday in Wellington. The competition watchdog said it needs to be easier for new building products and new methods to be introduced into New Zealand, and for competing suppliers to be able to expand their businesses.

“It’s harder for alternative products that offer consumers a choice to get into or expand in the market,” Building and Construction Minister Megan Woods said in a statement. “We welcome these findings and will consider the recommendations, to understand what changes are necessary to help increase competition, and ultimately bring down costs for consumers.”

Rising building costs have been a big component of New Zealand’s soaring inflation rate, which hit a three-decade high earlier this year and has forced the central bank to aggressively tighten monetary policy. While supply chain disruptions and labor costs have hit the building industry hard, the lack of competition in the supply of key products like cement and plasterboard has added to cost pressures.

The government instructed the Commission to start the market study in late 2021. It will respond to the recommendations by March, Woods said.

The Commission said two factors were making it difficult for competing products to be introduced into the market -- a building regulatory system that favors familiar products, and rebates paid by suppliers to merchants based on the volume of goods purchased. The use of land covenants and exclusive leases that could shut out rivals’ stores is also occurring, the regulator said.

Fletcher Building, the nation’s biggest supplier of products to the construction industry, said Tuesday its Winstone Wallboards unit -- the only domestic manufacturer of plasterboard -- will stop offering certain types of rebate to merchants.