Building material costs

November 7th, 2013 at 3:00 pm by David Farrar

The Government announced:

The Government is proposing increased transparency, simplified compliance, changes to anti-dumping duties and tariff concessions to bring down the cost of home building materials, Housing Minister Dr Nick Smith and Commerce Minister Craig Foss announced today.

“Building materials costs are too high and can be as much as 30 per cent more in New Zealand than in Australia according to the Productivity Commission. The industry needs a shake-up through increased competition and greater transparency to ensure kiwi families can get access to more fairly priced building materials and homes,” Dr Smith says

“Our market study has flushed out some very real issues in the building materials industry. I worry that high duties on some imported building products, combined with limited competition in New Zealand is allowing excessive margins by building product manufacturers. I also have concerns over a lack of transparency for consumers over what benefits builders are getting from using certain products,” Dr Smith says.

The options paper is here. Some of the options include:

  • Reform of BRANZ governance
  • Prevent specification of “no substitutes”
  • Require disclosure of financial and other benefits
  • Limit continuation of anti-dumping duties

I’m all for disclosure and lower tariffs.

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31 Responses to “Building material costs”

  1. dime (9,459 comments) says:

    Im sure the costs are too high.

    It would be good to reduce compliance costs. Make business easier.

    You also have to look at bottom line. Are these guys actually killing it? if so, why isnt there more competition? cost of entry?

    are they breaking laws and keeping people out?

    Dime doesnt get why we dont just bring in kit set houses from the US. surely thats cheaper

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  2. gazzmaniac (2,317 comments) says:

    I would be highly pissed off if I had signed a contract to build that specified a particular brand of plasterboard and it was substituted by the builder for a different product.

    The problem is not with the suppliers, the problem is that all new products require certification from a monopolistic research organisation. Remove that requirement and allow certification from foreign (or another domestic) lab and you will remove the problem.

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  3. anonymouse (695 comments) says:

    The Tariffs comment is a red herring, the maximum tariff on building supplies is 5%, and from most of our FTA countries its 0%,
    The large Ozzy suppliers like Bunnings et al can source directly from Australia (where is is supposedly 30% cheaper) so why haven’t they totally undercut the market?- the products already meet the appropriate NZ/AS standards

    What it will take is some builders of volume in NZ to negotiate bulk purchases to drive out the margins, Nick smith’s Extra bedrooms will help,

    but having NZ home builders essentially building bespoke houses from very small building firms is one of the key reasons our prices are high.

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  4. Alan Wilkinson (1,816 comments) says:

    Exactly why do I need government approval to use any building product I choose?

    Remove that bureaucratic nonsense and you will remove the problem – and save taxpayers megabucks of unnecessary bureaucrats.

    Plus NZ houses are rarely on flat sections – the difference between Aus and NZ in that respect is chalk and cheese.

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  5. b1gdaddynz (279 comments) says:

    I can tell you for a fact that building supplies merchants aren’t making a killing; I have worked in the industry for 14 years and margins have never been tighter! It maybe possible that the manufacturers/importers are creaming profits but I doubt it given the market conditions. Get the price of compliance and land down and that will be the fastest way to reduce the cost of building houses! Unless of course you expect the builders and merchants to it for nothing!

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  6. RRM (9,471 comments) says:

    (Page 18)

    Concerns about designers specifying products by brand

    Most elements of residential construction are determined at the design-stage, from the individual materials and construction methods to the overall design concept. A particular concern raised in submissions to the Issues Paper was that designers often specify brand-names in the design and that this may act as a barrier to innovation or competition from alternative brands since substitution is then difficult later in the process.

    The design, right down to the individual materials that are specified, is assessed for Building Code compliance by the relevant BCA. The BCA assesses the plan for performance against certain criteria, such as structural soundness and fire safety. Specification by performance allows a design to be approved in a way that is not reliant on the use of particular brands. Later in the process, the builder is then free to choose among competing products, providing they possess the characteristics specified in the plans.

    However, submitters have indicated that in most cases, designers do not specify by performance, and instead include particular brand names in plans. These brand names can be accompanied by an explicit “no substitution” statement, preventing the future use of an alternative product later in the process without a change to the plans. Even where
    the design does not specify “no substitution” it appears that some BCAs are unwilling to accept other brands, even where the relevant characteristics are the same.

    Specification of a particular brand acts as a disincentive to later switch to an alternative product, even if that product proves to be cheaper or of better quality. At a minimum, a change from a specified brand to an alternative requires a note be added to the plan. This introduces costs as a result of the designer’s fees for their involvement, and delays to the commencement of construction in the absence of a building consent. These costs are not substantial, and are certainly not insurmountable. However, they have the potential to act as a disincentive to change products or methods and diminish any cost efficiencies that might be realised by doing so. In more serious circumstances, such as when the change relates to the structural integrity of the building, the consent must be re-submitted to the BCA, incurring a fee and further delay.

    No.

    We designers have our reasons for specifying brand X.

    And designers have to sign off legal declarations that our work complies with the building code.

    And designers get the blame when something we’ve designed sags or breaks or doesn’t work and needs fixing up.

    And designers have to pay to have indemnity insurance in case something we’ve designed sags or breaks or doesn’t work and needs fixing up.

    You want us to provide all that, AND you want the freedom to unilaterally strike out elements of our design that you don’t like, and substitute them with products that are (in your worldly opinion) “equivalent”??

    No.

    You can have one, or the other.

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  7. cha (3,779 comments) says:

    A quick google:

    GIB ® STANDARD 2400MM X 1200MM X 10MM – $21.20NZ

    Plasterboard T Edge 2400x1200x12.5mm – £5.27

    Gyprock 2400 x 1200 x 10mm – $10.90AU

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  8. Nigel Kearney (864 comments) says:

    >Exactly why do I need government approval to use any building product I choose?

    Because if the house is built with poor materials, some ignorant/careless future purchaser will end up with a cold/leaky house and go crying to John Campbell who will demand that the government ‘do something’. And if the government doesn’t, some charlatan like Winston Peters or Russel Norman will promise to ‘do something’ if we vote for them.

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  9. RRM (9,471 comments) says:

    >Exactly why do I need government approval to use any building product I choose?

    Because you want house insurance to be a reasonably predictable price.

    Because builders have this habit of winding up the business and moving to the Gold Coast just before the past comes back to haunt them.

    Because tax/ratepayers end up picking up the pieces of things like leaky buildings.

    Because the property will still be here long after you die, if you’ve built rubbish on it you’re littering on New Zealand’s green and pleasant land.

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  10. gazzmaniac (2,317 comments) says:

    designers often specify brand-names in the design

    RRM has already covered it, but there is a legal liablity for the design of the house if there is a failure. If a designer specifies a product, it should be that product unless specified “or equivalent.”

    It is up to the designer to specify a product. If the designer is happy to specify Gyprock instead of Gib, then that is the call of the designer not the government. If somebody wants Gyprock in their house instead of Gib, or are happy with Bradford Gold rather than Pink Batts, then they should tell the designer that before they start designing the house.
    The government has said that designer is the person who must specify things, and has said that they are liable for design mistakes. They have said that designers must be competent and have a licensing scheme in place to that end. They cannot then say that the designer is wrong and the specifications can be changed at will.
    If a designer has a good working relationship with his builders then they will encourage him to use cheaper products when it is appropriate.

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  11. Ed Snack (1,738 comments) says:

    Gib board is the classic. It has been a few years, but when I worked at part of Fletcher Building, they were absolutely creaming it in the market, biggest single profit centre in the whole business with huge margins. And if you really think that a certified Australian equivalent is “not up to standard” then you need your head read RRM. It’s probably better; more tightly specc’d and better manufactured. Not sure how the protection works but if you couldn’t import an equivalent (or better) board from Australia at a better price I’d be somewhat incredulous.

    Other items I’ve had direct contact with the manufacture and marketing of like framing timber and the like, much more competitive with a lot of potential manufacturers. And that’s the key, competition. There are costs imposed by distance and smaller markets, but a decent bit of competition sorts that out so there’s as little price differential as is reasonable.

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  12. Alan Wilkinson (1,816 comments) says:

    @RRM, nonsense. I don’t give a rat’s arse about insurance being a predictable price. I know my premium will be based on whatever replacement value I nominate to insure.

    I don’t care where my builder goes after I have paid him. It is my job to make sure I don’t choose him and certainly don’t pay him if he doesn’t work to the standard I want. It’s not his job to insure me.

    It certainly isn’t the taxpayer’s job to insure me and the lunatic politicians who have let this happen should be put up against the wall and shot.

    It’s my land and if I want to build what you think is rubbish on it that is just very tough bikkies for you. Go build what you like on your own land and I’ll probably have a similar opinion of that. What sort of fascist are you?

    @Nigel, that’s about right. A pathetic lot of brain dead sheep we’ve raised in this country.

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  13. gazzmaniac (2,317 comments) says:

    Alan, if designers are mandated in legislation as liable for the design of a building then they damn well should be able specify a product that will help mitigate that liability

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  14. GJM (58 comments) says:

    /quote “The problem is not with the suppliers, the problem is that all new products require certification from a monopolistic research organisation. Remove that requirement and allow certification from foreign (or another domestic) lab and you will remove the problem.”
    /quote

    No, you can get products tested overseas. The
    One problem up unitl April 13 was the surface finish test for fire we used in NZ couln’t actually be tested here – it had to be done in Australia. We have now moved to the ISO5660 standard, so any accredited lab in the world can test it, and it is faster, cheaper and more meaningful. A lot of the products for that standard are tested in Oz by AWTA or CSIRO.

    The problem of cost in the NZ Building Industry is many fold, small volumes, seismic requirements not found in Oz, vertical monopolies (Fletcher and CHH), incumbent players making distribution and marketing penetration difficult, and no doubt many more.

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  15. Alan Wilkinson (1,816 comments) says:

    @gazzmaniac, that is not the point. It is up to the owner to contract with the designer. The bureaucracy should have nothing to do with it, nor should the law beyond normal contract obligations.

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  16. Viking2 (11,144 comments) says:

    Ask the Aussies what they now think of Chinese gib board. Or engineers what they think os lots of failing Chinese steel components. (Start with the railways and Chinese bearings).

    All specifications are not created equal and its not to difficult to get a sign off on rubbish when you pay’s the money.

    and of you think you are getting what you spec then you had better test.
    Thousands of counterfeit ball bearing bearings are being confiscated in aussie. Labelled with top brand names but useless. Caused problems all thru the mining industry.

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  17. RRM (9,471 comments) says:

    Ed –

    I get my head read every time I go to a site and see something being done wrong, in a way that could fall down and kill someone. In other words about twice a month. My psychiatrist loves me.

    I don’t care about trivial stuff like plasterboard, obviously substituting gib with some other brand is not going to kill anybody or cost a fortune in fix-ups, and any fool can see from 20 metres away if a change has been made just from the colour of it.

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  18. gazzmaniac (2,317 comments) says:

    Alan – if an owner wants to cut costs and use inferior products, the building act says the designer is still liable for the design. He cannot assign that liability to the owner or to the builder. Therefore to reduce his risk he will specify products that he is familiar with. If the government interferes with that and mandates that an out of specification product can be used then the designer should no longer carry the liability for that component of the building.

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  19. gazzmaniac (2,317 comments) says:

    RRM – a substitute for plasterboard could cost a fortune in repairs. If the substituted product is not installed in accordance with that manufacturer’s specifications because the carpenter is used to a different product, then the builder (head contractor) is liable for any repair work even if the product failed. Given that gib moving is probably the number one cause of call backs for new houses (since it has a direct bearing on finishing) it is a pretty important issue.
    Being a designer you would know exactly how finnicky Gib are with how to fix their product to a wall or ceiling, and the cynical amongst us would say it is precisely for the reason specified above.

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  20. Alan Wilkinson (1,816 comments) says:

    @gazzmaniac, you don’t have to convince me the building act is insane. That is my point. The Government’s right to interfere in private construction begins and ends with health and safety. Everything beyond that is madness.

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  21. duggledog (1,359 comments) says:

    Why would you build or buy a new house. They look shit, have no character, cost too much, & don’t last.

    Get an oldie but a goodie, preferably one made of heart rimu. There are heaps for sale at those demo yards for bugger all, they even re site them with new piles, away you go for another 100+ years

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  22. gazzmaniac (2,317 comments) says:

    I’d rather have a well insulated house built for the sun thanks. Plus I’m not a really big fan of asbestos, or 40 year old wiring (if you’re lucky).

    Modern houses will probably last as long if not longer than the old shitboxes that litter the towns and cities of New Zealand.
    Having owned one of each, I have to say a house built in the 1990s is a far better buy and way more comfortable than one built in the 1920s.

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  23. Steve (North Shore) (4,499 comments) says:

    “Having owned one of each, I have to say a house built in the 1990s is a far better buy and way more comfortable than one built in the 1920s.”
    Yeah the floorboards squeak – so the neighbours can hear you rooting

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  24. Pauleastbay (5,035 comments) says:

    “Building materials costs are too high and can be as much as 30 per cent more in New Zealand than in Australia according to the Productivity Commission.

    What a load of shit, the word used is CAN, not is or will be, but CAN.. I CAN be a nice person some times,sometimes only not is, but CAN if I want, its not an absolute just like these prices aren’t

    The biggest problem with building in NZ is fucking council compliance.

    Is Nick Smith going to go to the Police and say, ” You can’t accept cheap Holden’s this year you’ll have to go to the market ,or like what happened several years ago when Ford supplied the Police fleet free just to get their cars out there ( pieces of shit they were to).

    Nick do I have to stop using my vehicle service centre because I get free Wi-Fi and a free coffee.?

    Obviously the Productivity Commission can fuck off any time as well

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  25. PaulL (5,874 comments) says:

    @RRM: agree a designer should have discretion. But I think what they’re saying is that it would be good if designers had the _option_ of specifying by performance rather than brand. So they could say “plasterboard to NZS/ASxxxxx”, and so long as the plasterboard meets that standard then its OK. If you’ve done your design based on the plasterboard meeting that standard, you’re still fine. If a builder substitutes with plasterboard that doesn’t meet that standard, not your problem.

    What they’re saying is that currently _most_ designers specify by brand. And that restricts competition, because why would Gib need to cut their prices if they know that nobody can go elsewhere.

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  26. Kea (11,878 comments) says:

    People get very emotional about housing. Not because they give a shit about standards, but because most of their money and sense of self worth is displayed by their home.

    This thread is about self affirmations and general wanking.

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  27. gump (1,488 comments) says:

    I’m always amused by the cognitive dissonance on this board.

    One side of the mouth calls for less regulation of free markets, and the other side calls for more regulation.

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  28. Scott1 (448 comments) says:

    Why can’t we with all these things like building materials and almost everything else just go “if it is good enough for UK or Australia or Canada or USA then the burden of proof is on the side saying it is NOT acceptable in the NZ context.”

    Then depending on he risks involved we could have various levels of restrictions on products that were not yet ‘approved in a NZ context” from allowing them until proven otherwise like with health food to something like forcing the people selling them to highlight they are not approved to all involved and maybe paying into some sort of insurance.

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  29. gazzmaniac (2,317 comments) says:

    A foreign building system can be used, however there needs to be compliance documents that prove it is compliant to the New Zealand building code.

    For a one off project it would not be worthwhile.
    It is much easier for the designer to use a local system and use compliance documents that they (and the council) know.

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  30. Alan Wilkinson (1,816 comments) says:

    @gump, this thread just demonstrates the problem. The building bureaucracy has generated a vast network of vested interests dependent on its powers to constrain and tax the property owner. They maintain and extend these powers via the usual fear tactics the media and politicians have perfected over the past century.

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  31. Map24 (1 comment) says:

    New products do not all have to be “certified”. You simply have to demonstrate to the relevant BCA that the product/system complies with the Building Code. Some BCAs recognise certain “certifications” i.e. BRANZ as meaning that the product/system has been adequately tested to comply with the Building Code, but this is not the only way. The link below explains the product assurance framework in New Zealand – and there is a reason we have the Building Code. One of which is to avoid systemetic failures like the leaky homes crisis. It will be extremely hard to significantly reduce costs without compromising the quality of the products used in NZ.

    http://www.dbh.govt.nz/UserFiles/File/Publications/Building/Compliance-documents/Product-Assurance-Framework-guidance.pdf

    The fact is that NZers want to specify the design of their homes and choose to build much bigger (an increase of 30% in the footprint of a home over the past 30yrs) than they used to. If people accepted standard designs and smaller houses, they would save on cost.

    Coucil compliance is more difficult than it could potentially be, but this is because they have been left to pay out a majority of the leaky home costs. Councils want to ensure that are at minimum risk bearing any burden for repairing/paying out homeowners if buildings fail. We saw through the leaky homes debacle that builders and designers got off through limited liability companies and councils had to pay.

    If there weren’t any Government regulations about the standard of buildings, the building stock in NZ would likely fail on a major scale and future generations would be left to pay and tidy up the mess.

    PaulL has the designer specification thing right. Designers are “responsible for ensuring that the plans and specifications or the advice in question are sufficient to result in the building work complying with the building code, if the building work were properly completed in accordance with those plans and specifications or that advice.” So as long as you specify that the product/system must comply with the relevant part of the Building Code, you will be fine.

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