A rise in construction costs has been blamed on New Zealand‘s efforts to open the market up to more competitors and novel items.
A study by the Commerce Commission looking into the residential building materials market was released on Tuesday in Wellington. The government has since indicated its readiness to implement the report’s recommendations. The competition regulator has recommended making it more straightforward for innovative construction materials and practices to enter the New Zealand market and for existing competitors to grow.
For alternative goods that provide customers more options, “it’s tougher for them to get into or develop in the market,” Building and Construction Minister Megan Woods said in a statement. To better understand what has to happen to boost competition and, in turn, drive down prices for consumers, we appreciate these results and will evaluate the proposals.
New Zealand’s inflation rate touched a three-decade high early this year, and the country’s central bank has since been compelled to aggressively tighten monetary policy. Lack of competition in the supply of essential items like cement and plasterboard has additional cost pressures to those already brought on by supply chain interruptions and rising labor prices in the construction sector.
The federal government has mandated that the Commission initiate the market analysis by the end of 2021. According to Woods, the company plans to reply to the suggestions by the end of March.
The Commission identified two barriers to entry for alternative products: a building regulatory system that gives preference to established items and rebates offered by suppliers to retailers depending on product volume. The use of exclusive leases and site covenants that may prevent competitors from opening nearby is also happening, the regulator said.
Winstone Wallboards, a division of Fletcher Building and the sole British plasterboard maker, said on Tuesday that it would no longer provide certain forms of rebate to retailers.
