Claims against building supply chain an “exaggeration”

4 May, 2018

“Claims by the Minister of Housing that the building materials supply industry is far too uncompetitive are an exaggeration,” says the Chief Executive of the Building Industry Federation, Bruce Kohn.

“The sector is in fact one of the most competitive in the New Zealand business environment with participants under ever increasing pressure from imported products and materials from Asian countries, China in particular.

“Margins in most areas of supply are tight. Any microscopic investigation of the situation within the supply chain is more likely to show up extreme concern about the entry of noncompliant products from offshore than pricing practices reflective of rorts and anti-competitive practices.

“New Zealand materials suppliers have to ensure that critical materials and products they bring to market are appropriate for earthquake conditions, prolonged exposure to UV in the outdoors and frequently salt laden high wind situations. But the most recent comprehensive market study carried by BRANZ disclosed overall prices were not out of line with those in Australia.

“There were variations in pricing from city to city, region to region, in both countries with some materials and products’ prices up and some down.

“Clearly in some New Zealand market areas where highly efficient service and quality manufacture has resulted in a product achieving a high market share questions will be raised. But it has to be recognised that in a small scale market with long supply lines, new entrants wishing to compete will inevitably determine the return on investment is insufficient to justify long term involvement.

“The Industry is concerned that Minister Twyford may look to use claims against one segment of the market to justify government intervention across a range of areas at the expense of free market operations.

“In the hardware merchant sector alone suppling trade and DIY customers there are five operating companies, each competing vigorously for market share. Profitability pressures in the steel industry are such that the country’s major manufacturer has warned of possible closure unless cost savings are achieved.

“The microscopic investigation the Minister looks for will not find that the cost of building materials is driving up house prices. He should look more closely at the impact of land prices increases and fresh initiatives, such as development charges, being imposed on the industry as a whole by local governments.”

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