Building material costs: Warning more companies will collapse amid soaring prices

Unrelenting building material price hikes are putting the industry under stress. Photo / Getty Images

Builders are facing further hikes in material costs this year - sparking fears ''unrelenting'' price hikes could topple more building firms and make home builds unaffordable.

A price increase notification list sighted by NZME shows 32 suppliers are increasing their prices in July and another 17 in August. The list showed projected increases of between 3 per cent to 25 per cent.

Master Builders Association national vice-president Johnny Calley, of Tauranga-based Calley Homes, said material price increases were "unrelenting" and the affordability of building a home "was getting worse by the day" for customers.

He believed more competition was needed in the building supplies sector and supports the Commerce Commission looking at the issue.

The commission is carrying out a year-long study into whether competition for residential building supplies in New Zealand is working well and, if not, what can be done to improve it.

By Calley's calculations, the cost of building materials increased by 34 per last year and he believed they would increase by a further 20 per cent this year.

''The frustrating thing is it just seems like it is an acceptable practice to offload prices onto the industry and there doesn't seem to be any consequence to it because of the demand.''

Some housing companies had already collapsed and others could follow suit - ''this is not limited to the regions but across New Zealand''.

Wellington builder Armstrong Downes Commercial, which worked on school projects and one of Wellington's largest apartment developments, went bust earlier this year and its first liquidator's report shows an $8.7 million shortfall. The insolvency of Tauranga builder Oceanside Homes also left two unfinished dwellings and businesses and tradespeople owed more than $500,000, its liquidator said last month.

Calley said building a house now cost 30 per cent more than it did one year ago.

''New Zealand doesn't have high levels of competition in material supplies.''

In his view, the situation was similar to the supermarket sector and regulatory settings could have a positive effect.

Calley was also concerned energy efficiency changes in the New Zealand Building Code due to be introduced in November could also add another $25,000 to the cost of building a new home. The industry had lobbied to get that deferred to next year.

Master Builders Association national vice-president Johnny Calley of Tauranga-based Calley Homes. Photo / Supplied

Classic Group director Peter Cooney. Photo / NZME

Steve Wright, from Steve Wright Builders in Rotorua, said the material price increases were out of his control.

''We are turning work away because we can't get Gib board. I'm over it and there are lots of issues but I have to stay in business.''

Wright said he had to pass costs onto its clients.

''It's all out of my control and I have to move on otherwise it would drive me mad.''

Classic Group director Peter Cooney said if the current situation continued the industry would have to switch to ''survival mode''.

''I believe we have the perfect storm made up of the lack of infrastructure to unlock land, rising costs, interest rates increasing, and more. The industry is slowing down at a faster rate than we expected.'

''However, if we can get the price point right, we will be meeting the demand we know is still there.''

Troy Davy, from Davy Construction - Home Builders & Renovations, said it was cheaper to build a house in Australia despite the cost of labour being higher.

Venture Developments director Mark Fraser-Jones said the industry was limping along dealing with a myriad of hobbling factors.

''It is another nail in the coffin of housing affordability. There is no quick fix, higher interest rates have had the desired effect and dampened the housing market, but nothing has been done to address the underlying affordability issue.''

Classic Builders operations general manager Rowan McKeany said other factors affecting the cost of building were delays in titles being issued, building consents being approved and getting some materials to sites.

It was also becoming increasingly hard for people to get finance at the beginning of the process, he said.

Louis Davis, of Tauranga Builders, said the price of materials had taken out the margins for a lot of people.

''It's a funny market to be working in at the moment and the cost of building a house is not going to get any cheaper.''

A Commerce Commission spokesman said it had received more than 250 responses across the study's three surveys and the results were being analysed.

It hoped to publish a draft report in late July that sets out its preliminary findings of factors affecting competition for key residential building supplies, he said.

''If we make preliminary findings that competition is not working well, we may develop some proposed options to improve competition. We will seek feedback on the preliminary findings and any proposed options.''

Minister for Building and Construction Poto Williams said there was no quick fix to the issues, given the ongoing pandemic, the complexity of global freight issues, and the global demand for construction raw materials and products.

Addressing the current plasterboard shortage was one of the Government's current top priorities, she said.

The Ministry of Business, Innovation and Employment was working with the Building Consent Authorities towards a more consistent approach to treating the substitution of plasterboard products as a minor variation to consents.

The Government recently announced $37 million in funding to support a plan to address workforce skills, workforce diversity and strengthening productivity across small to medium enterprises.

MBIE building performance and engineering manager Dave Gittings said the transition period for the energy efficiency changes could be extended for six months to May. MBIE estimated the new insulation requirements were likely to cost from $9000 to $15,000 for new housing versus the minimum requirements previously in place.

However, the cost could vary depending on the size of the house and the location in the country, he said.