Commerce and Consumer Affairs Minister David Clark unveils market study of residential building supplies market

Below is a press release from Commerce and Consumer Affairs Minister David Clark issued on Sunday afternoon.

Govt to review high cost of residential building supplies in market study

Ensuring Kiwis have access to fairly priced building materials is a driving factor in Government’s decision to review the residential building supply market, Minister of Commerce and Consumer Affairs, David Clark, announced today.

“We’re looking at how we can lay the foundations for a more competitive building sector,” David Clark said.

“We are delivering this manifesto commitment because good housing underpins a range of social, economic and health outcomes. Therefore, it’s critical Kiwis have access to fairly priced building supplies.

“Understanding any market barriers could play a key role in supporting New Zealanders achieve home ownership, so I’m pleased the Commerce Commission will be getting this work underway.

“It’s clear a significant portion of the costs associated with building residential housing is tied to building supplies. As New Zealand’s population has increased over the last decade, residential building consents have more than tripled. Alongside that, current demand for renovations and extensions to existing homes is at the highest it’s been in 15 years.”

The study will allow the Commerce Commission to investigate any factors that may affect competition for the supply or acquisition of key building supplies. This includes: the foundation, flooring, roof, walls and insulation.

“There have been long-standing concerns about potential competition issues, particularly due to the highly concentrated nature of some markets in the supply chain,” David Clark said.

This is the third market study of its kind in New Zealand. It follows a similar piece of work into the retail fuel sector completed in December 2019 which found that motorists were paying higher petrol prices due to a lack of competition, and led to the Fuel Industry Act. The second market study into the retail grocery sector is ongoing, with the final report due in March 2022.

The Commerce Commission will present its final report on residential building supplies in December 2022.

Editor’s notes

Market studies help improve consumer outcomes in sectors where competition is suspected not to be working well.

The Commerce Commission will have the ability to commence the study once the Terms of Reference is published in the Gazette, which is expected to happen on 22 November 2021.

The matters to be considered in the building supplies sector study may include, but are not restricted to:

1. The industry structure for key building supplies covered by this study
2. The nature of competition for these key building supplies, including any industry pricing practices or acquisition requirements that impact on competition
3. Impediments to the entry or expansion of new or innovative building supplies, such as ‘green’ building supplies or novel prefabricated products.

The Commission is required to publish its final report on the study by 6 December 2022.