Building industry investigation

TV3’s 3d have done an investigation into price rorting in the building industry. We certainly seem to have higher building costs than Australia, and this is on top of our land costs and cost of burearacracy.

Are we paying too much to build our homes?

A 3D investigation has uncovered a whole range of practices in the building industry keeping New Zealand prices high, from perk trips for builders to exclusive stocking deals at hardware chains.

Kiwis are paying so much for building materials – the building blocks like timber, concrete and plaster – contributing to ballooning costs.

Tony Sewall, head of Ngai Tahu Property, the biggest developer in the South Island, has sent teams around the world to investigate building material prices.

“We’d be paying around 30 percent more than in Australia, probably 60 percent more than the United States,” he says. “And the United States’ product is better.”

The latest Quotable Value statistics tell us $280,000 to $312,000 will build you a medium home in New Zealand. In Australia it’s much cheaper – an equivalent house will set you back $260,000 to $280,000.

That’s just the house building costs.

“We need to open up the New Zealand market to the international one,” says Mr Sewall. “If there’s a product that’s being used on a building here, the builder should have choice from all around the world. That will keep the competitive tension up and keep the pricing at the right level.”

Bunnings New Zealand blames transport costs and our small population, but there’s a myriad of things industry insiders say are pushing up prices.

There are exclusive deals between some suppliers and big hardware chains to stock only one brand of product, so there’s no choice for the consumer. And then there are also kickbacks and rebates – rewards designed to keep builders loyal to a particular type of product.

So claims there are anti-competitive practices in the industry. A specific example was given:

When it came time for the Government to decide who would supply plasterboard to the Christchurch rebuild, the contract went to Gib and a major German firm, Knauf. The Government said it would help improve competition.

But within a year, the German company ran into problems. There were resignations and the company announced it was reviewing its New Zealand operations. The world’s second biggest supplier of plasterboard simply couldn’t gain traction in a market dominated by Fletcher Building.

In fact, Fletcher’s share of the New Zealand plasterboard market is 94 percent. After several complaints, including from Knauf, the Commerce Commission investigated.

It found evidence of aggressive market behaviour, but no illegal, anti-competitive practice.

But official MBIE briefing notes for the Commerce Minister from February this year, well after the Commerce Commission’s decision, warn the building sector could be susceptible to cartel-like behaviour and that aggressive market tactics do “curtail competition in the supply of alternative wallboard”.

It went on to say the “comparatively high cost of wallboard in New Zealand is having an impact on the cost of construction”.

Big business monopolies and duopolies can be bad for competitive pricing.

The journalist who investigated for that report, Michael Morah, has also posted an opinion piece. Opinion: Govt action needed on building industry. He concludes:

Considering these issues have the potential to affect thousands of ordinary Kiwis, you’d think it was something one of our politicians or policymakers would front up to talk about.

To be fair, the Government did appear to take action last year in an effort to improve competition. What it did was cut tariffs or taxes on some imported products, the idea being that we’d get a lot more international products into the market for less and it would push prices down.

Unfortunately, however, this move hasn’t had much of an impact and the Government knows it. In fact, it was told the perceived benefits didn’t stack up.

Official Cabinet papers 3D has obtained reveal the behind-the-scenes decision-making process when the cut on tariffs was about to be introduced. The documents show the Ministry of Foreign Affairs (MFAT) advised Housing Minister Nick Smith that any competition gains from a tariff suspension would be “limited”, and that in any event, the impact of these taxes on the price of residential construction was “marginal”. Despite this, the Government went ahead with the rule change.

On the rebate and loyalty issue, the Government effectively decided it was all too hard and left it alone. But in my view there must be greater transparency and accountability.

Consumers rely on builders, architects and draftsmen to make calls about what materials they use. The problem with this, as we discovered in our 3D Investigates story, is that there’s often a cash deal or a perk helping shape opinions and key decisions – this as MBIE officials pointed out in briefing notes on the issue can be used “to reinforce market power”. It appears this is exactly what’s happening currently across a range of products.

Whether the Government will do anything further to promote greater innovation and competition in the industry remains to be seen. MBIE to its credit does sound genuinely interested in improving the status quo.

But in the meantime, if you’re getting some work done on your house, considering building your own home, or purchasing some materials at your favorite DIY store, don’t forget to ask some questions. And if you’re not satisfied, go online and Google some alternative brands or products. You might find you’ll make some significant savings.

3D on Malcolm Rewa

3 News is promising revealtions on Malcolm Rewa tonight on 3D (6.30pm). They are promoting the news in advance:

Malcolm Rewa family member: ‘We know what went down

A member of Malcolm Rewa’s family has come forward with new evidence against him in the unsolved Susan Burdett murder case.

He has told 3D Investigates he is prepared to testify against Rewa in any fresh prosecution.

“I would give evidence,” the man told the programme. “We know what went down and how it happened.”

3D Investigates will tonight reveal fresh information about Rewa’s involvement in the 1992 rape and murder of Burdett in her Papatoetoe home.

The family member, one of two witnesses with new details, says he wants to apologise to the Burdett family.

“I apologise for what has happened. They lost a loved one and I wouldn’t like it to happen to my family. And I don’t mind helping the family.

“I should’ve been a man enough way back and come forward.”

Yes, he should have been man enough way back. But better very late than never.

Rewa, jailed in 1998 for attacks against 25 women, faced two trials for murdering Burdett. He was convicted of raping her, but neither jury could agree on whether he was guilty of murder.
The complicating factor in the Rewa case was that another man, Teina Pora, had previously been found guilty of killing her.

Pora spent twenty years in Paremoremo prison. Possibly because one or more people remained silent. Until now perhaps.

UPDATE after 3D screened – two pieces of information.

Susan Burdett murder: Witness saw Malcolm Rewa on the night

A witness who lived in a house just down the road from Ms Burdett at the time of the murder saw Rewa parked in his truck in her driveway on his own on that night, and that evidence has never been heard.

She says she opened the curtain on the night of the murder and saw Rewa parked in his truck in her driveway, on his own, with nobody else around.

Up till now, there has only been physical evidence – DNA of semen – connecting Rewa with Ms Burdett. There were no fingerprints, no eyewitnesses, and Rewa claimed in his defence that he was at home on the night.

So to now have an eyewitness who saw him in Ms Burdett’s street, on his own, without Mr Pora, is a breakthrough.

And:

In video the police took in 1992 at the scene of the crime, a bat can be seen on Ms Burdett’s bed. The prosecution has previously said the bat belonged to her.

“Yeah the old baseball bat,” says Mr Manapiri, “I first saw that when I come back from Australia.”

“[Rewa] had a Holden, and he took me up to Ruakaka on it – him and his daughter – and I seen that baseball bat quite often … it’s the old colour of the old baseball bat what he used to carry.

“That’s the one. And I seen it quite often. He used to carry it in his van and stuff like that too.

“He used to beat his dogs and he was in the gang, and I suppose that was his weapon.

“I’m telling you that’s his bat left at the scene and, you know, that shows that he did it.”

Mr Manapiri says he told the police at the time. He can even describe the policeman he spoke to, but it never appears in any of the police records

This looks like significant new evidence that may justify re-opening the case.

It also raises concernes that the Police may not have recorded important information given to them during the investigation.