Today, the Commerce Commission releases its findings on house-building supply market competition.
The report's release coincides with the Gib crisis and new residential consents running at all-time highs.
At 8.30am today, the commission's findings are out on its in-depth market probe into the cost of residential construction materials.
This comes at the same time as builders, angry about the Gib shortage, import rival plasterboard and annual consents run at 50,000-plus for the fourth consecutive month.
Commerce and Consumer Affairs Minister David Clark said last year that ensuring we get access to fairly-priced building materials was a driving factor in the Government's decision to launch this big probe.
He had some fighting talk, referring to "long-standing concerns about potential competition issues, particularly due to the highly concentrated nature of some markets in the supply chain".
Clark didn't mention Winstone Wallboard's 94 per cent market share in New Zealand's plasterboard market, or other strong positions Fletcher Building and Carter Holt Harvey businesses hold in the market.
The Productivity Commission estimated people in New Zealand pay between 20 and 30 per cent more for building materials than those in Australia.
Finance Minister Grant Robertson has also been outspoken, indicating a strong political appetite to examine high building material costs.
Last May, Robertson told attendees at an event hosted by Deloitte and the BNZ at their offices at 80 Queen St that we pay "far too much for building supplies". During question time after his presentation, he was asked if the Government had a role in the building sector materials. Robertson answered: "Certainly is. Those supply chain issues are global and they are going to continue.
"On the specific topic of building supplies, you do raise an issue which is in our work programme which is that New Zealand pays far too much for building supplies and you only need to look across to New South Wales/Victoria to see how different it could be," Robertson said last year.
Andrew Bayly, National's construction spokesman, said: "There's no doubt the commission will find there are definite areas where participants are able to exert significant market power: in concrete and structural timber and plasterboard. They identified that already.
"The biggest issue is whether entities are in a position to exercise monopoly power and thereby extract super-profits or excessive money. It's slightly disappointing the commission didn't look at that.
"Take plasterboard as an example: if people are getting a product like that at an internationally equivalent price, it's fine. But if excessive profits are being extracted, then it's disappointing.
"How do we ensure New Zealanders can buy lots of different products at competitive prices? This is where regulatory barriers come in. In some cases, problems will be caused by those. It's expensive to import products to New Zealand. It can take up to a year to get them approved," Bayly said, citing Government, BRANZ and others.
In many cases, market power is linked to distribution arrangements "and I'd hope the commission would have looked at that. They picked up on the concentration of supply. Some would say - and it's the same with supermarkets - if you have a wholesaling operation, does that give you the ability to ensure you have significant market power if, as well, you have a distribution operation?"
Bayly said the commission's report was timely and he hopes for recommendations of change: "I'd be disappointed if there weren't clear recommendations."
So will the commission be adventurous on this, or cautious?
Will it recommend deep structural changes, saying concentrated market shares are inflating prices to the consumers' detriment and resulting in unfair competition?
Will it say we have huge barriers to more competition and roadblocks to big overseas manufacturers coming here and that needs to be put to rights?
Perhaps it will tell us the rise of panelisation and off-site manufacturing could bring down prices, ushering in a new era of house-building where prices sink and choices rise.
Or will the authority go more conservative and refer to us being in a remote location with high seismic risks, a leaky building legacy which makes councils gun-shy, all with a relatively small population?
How much of a role do cultural factors play compared to regulatory requirements, our geography, the size of our market, role of earthquakes or difficulties standardising construction when we all want different houses?
These are the tensions the commission must straddle in today's findings.
It certainly got sector feedback when it asked for opinions: 25 submissions and four cross-submissions.
Submissions came from Building Confidence, Bunnings, BusinessNZ, Carter Holt Harvey, Concrete NZ, Fletcher Building, Frame & Truss Manufacturers Association, HW Richardson Group, Infrastructure NZ, Kiwi Infrastructure, Master Plumbers, Mike Greer and Tex Edwards, Mitre 10, Monopoly Watch NZ, National Association of Steel Framed Housing Inc, Construction Industry Council, Mental Roofing Manufacturers Association, OffsiteNZ, Property Council, Registered Master Builders, Roofing Association, Simpson Strong-Tie NZ, Steel & Tube, the New Zealand Initiative and Woof Processors & Manufacturers Association.
The study's aim was to consider whether competition in the supply or acquisition of key building supplies was working effectively and, if not, how that could be improved to work better for all of us.
It examined how competition is operating at all levels for the key building supplies it identified, although some submitters wanted the scope widened.
When it comes to competition barriers, national retailer Mitre 10 blamed our councils, building standard regulations and laws for making it hard for new, innovative building supplies to enter New Zealand.
It cited examples of big global businesses which came here and then left.
German building supplies manufacturer Knauf arrived here in 2013/2014 with its plasterboard brand after winning a government contract to help with the rebuild of Christchurch after the earthquakes. But it scaled back its plasterboard operations in 2014 after struggling to gain traction in the local market, taking longer to secure approval for its products and facing resistance getting into stores that had established relationships with existing firms, Mitre 10 noted.
Giant Australian business USG Boral also arrived here in 2018 before leaving in November 2021, Mitre 10 recalled. It supplied plasterboard, light gauge metal and ceiling tile from sites in Auckland, Wellington and Christchurch. When leaving the market, USG Boral's country manager noted that the New Zealand market has "presented several significant challenges to a new market entrant such as us", despite USG Boral's global scale capabilities, Mitre 10 recalled.
The Building Code and product requirements are overly restrictive, particularly taking account of the small size of the New Zealand market and cultural factors leading to a preference for previously used products, it claimed.
Even accepting that New Zealand had unique characteristics, like the role of earthquakes, wind and water, building regulation requirements extend beyond what was necessary. Other, larger markets also exhibit some of these characteristics and have standards in place to respond to them, Mitre 10 said.
When considering what standards are appropriate, councils could usefully seek to align our regulatory requirements with overseas standards, particularly Australia, where possible and appropriate, Mitre 10 argued.
"This could make entry into the New Zealand market easier and more attractive for international suppliers, particularly suppliers that are already active in Australia, without unnecessarily compromising safety," it says.
The NZ Initiative's paper from chief economist Eric Crampton raised concerns about councils being too cautious: "Because councils can be liable if a builder substitutes an equivalent material for a name-brand material specified by the engineer or architect, council will fail to approve buildings where substitutions have been made. This discourages builders from seeking new materials that might be more cost-effective – a barrier to competition."
It encouraged a more international approach.
The commission should begin its work with robust examination of barriers to entry, Crampton said. The commission could imagine itself as a property developer. If it sourced all of the materials necessary for building an apartment tower or home in Vancouver, or Tokyo, or Seattle, or elsewhere with trustworthy materials that are designed for shaky and wet conditions, could it use them to build? What barriers would it face? How would councils treat the consent applications? The result of that kind of investigation could prove very important in enabling the government's housing supply agenda, Crampton wrote.
One of New Zealand's largest house builders, Mike Greer, joined pro-competitive entrepreneur Tex Edwards to make a joint submission encouraging the commission to go further.
The two said they had been in informal discussions about house assembly transformation for some years. They shared observations about the house assembly business and said their key themes were that New Zealand needed industry transformation. Their key themes are:
• Transformation in building supplies which comes from scale;
• Off-site manufacturing and panelisation are sensible steps but not silver bullets; • Market structure of building materials needs fixing;
• Electrical, plumbing and drainage should be in the study.