The Government will take action to increase competition in the residential building supplies sector, says Building and Construction Minister Dr Megan Woods and Commerce and Consumer Affairs Minister Dr David Clark, following the release of the Commerce Commission’s market study final report.

“We asked the Commerce Commission to review our key building supplies markets and industry supply chains, to find what can be done to improve competition and ensure consumers were getting a fair deal,” David Clark said.

“The Commission’s report found two key factors negatively impact competition in this crucial sector, including incentives that favour familiar building products in the building regulatory system and quantity-forcing rebates.

“This means it’s harder for alternative products that offer consumers a choice, to get into or expand in the market.

“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, which is hugely important in these challenging global cost of living times.

“In the coming weeks and months, we will talk to stakeholders, with a Government response expected in March 2023. In the meantime, important work already happening, will continue,” David Clark said.

“Building supplies make up a sizeable chunk of the costs of new residential housing so we already have building sector reforms underway, including a review of the building consent system. The Commerce Commission recommendations dovetail into MBIE’s current review of the consent system,” Megan Woods said.

“System changes take time because they are important to get right, we continually look for opportunities to improve the way the current building consent system works while more significant reforms are developed. Today, the Ministry of Business, Innovation and Employment (MBIE) released updated guidance on the building consent process and a new standardised checklist for residential building consent applications. This will help lift the quality and consistency of building consent applications.

“Recommendations in the report align with moves we made to help resolve the national plasterboard shortage. The Commerce Commission notes this success, saying that MBIE initiatives and the Ministerial Plasterboard Taskforce illustrate what can be done to improve greater competition. The recently announced Critical Materials Taskforce springboards off that work to prevent further acute building supply shortages.

“But we know there is still more to be done to ensure consumers get a better deal and builders have the materials they need to do their jobs,’ Megan Woods said.

“The Commission also identified land covenants and exclusive lease terms as other key issues, which we have swiftly addressed and actioned in follow up to previous market studies,” David Clark said.

“These market studies are maturing, and with that we can see recurring themes starting to emerge. The use of land covenants and exclusive leases is a good example of this. The Commerce Commission has now recommended Government looks into the scale and use of land covenants, exclusive leases and contractual provisions with similar effect across the economy – which we will do.

“I would like to thank the Commerce Commission for its important work on this market study” David Clark said.

This is the third market study of its kind in New Zealand. It follows the retail grocery sector market study and the fuel market study both of which has led to action by the Government to improve competition.

The report is available on the Commerce Commission’s website.

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