Editorial: Timber should not be over-priced in this country

Something is seriously wrong with the market and the Government needs to fix it. Photo / Duncan Brown

Editorial

If there is one industry New Zealand should have in abundance it is house building. We can grow forests for timber, we pride ourselves on d.i.y., we have thousands of young people who are not in work or training for employment, and we have a desperate housing shortage.

The new Government has embarked on an ambitious KiwiBuild programme to provide 100,000 affordable houses within 10 years but it faces severe limits on the capacity of the building industry to supply enough houses at any price.

One of the contributors to the high cost of houses here is the cost of building materials, largely imported. The reasons for those costs were examined in our Property Report yesterday and they sound highly questionable.

The main excuse is our population size and distance from foreign suppliers. It is strange that these things do not seem to add to the costs of home appliances and many other imports that sell at internationally competitive prices here.

We also hear that a market of our size is easily dominated by two big suppliers who can set prices and use trade discounts to discourage builders from importing materials more cheaply. And it seems very few building firms have the capacity to do their own importing or even hold their own inventory of timber and other materials. Building Industry Federation chief executive Bruce Kohn points out that merchants double as a storage depot for all our self-employed builders "operating with a dog and a ute".

But if all of that is true, it appears to offer a yawning opportunity for competitors to come into the market.

What is to stop an entrepreneur from challenging the existing duopoly of Fletchers and Carter Holt Harvey by employing enough builders and other trades people to take on projects of the scale the Government is planning and importing the materials independently? The Government forest planting and regional development plans also offer more scope for the manufacture of materials here.

Perhaps the Government should be also putting more investment into training of builders and related trades, ideally through apprenticeships rather than purely polytech courses. Apprenticeships not only enable young people to acquire skills faster and earn incomes sooner, they subsidise the rapid expansion of small-scale building firms.

The "dog and a ute" days were a product of an industry vulnerable to fluctuations in demand. Builders could enter or leave the industry with minimal capital outlay. But those days are long gone.

Demand for house building and renovation has been strong for the past 15 years or more, thanks to low interest rates and the rising investment value of real estate before and after the global financial crisis. When building stalled briefly after the crisis, renovation too over. The demand should have brought legions of skilled labour into the industry yet after a decade and half it is still hard to get a builder in Auckland.

Something is seriously wrong with the market and the Government needs to fix it. KiwiBuild could find its own sources of supply and give the industry a fright.