Wednesday, 23 October 2013

Construction costs

The government's been worried about construction costs in New Zealand. The Productivity Commission suggested that our bespoke housing markets, caused largely by zoning regulations that restrict larger-scale new developments, help to inflate costs. But building materials also remain strangely expensive.

The NBR reports that the Government intends on coordinating its building material purchasing to reduce costs:
The government, which traditionally accounts for about 27 percent of the construction market, wants to expand the procurement programme to cover building materials as its spending ramps up.

"Since 2007, there has been an upward price trend on a variety of building materials despite reduced demand associated with the global financial crisis," the ministry said. "Our current forecasts indicate that increases in prices arising from renewed international demand, exchange rate movement, a reduction in raw material availability and rising transport costs will maintain or increase this trend.

"Given both the scale and potential increases in agency spend, government is keen to ensure that it takes a more collaborative, coordinated and strategic approach as to how it procures and pays for building materials," the ministry said.
Donal Curtin pointed to some less-than-helpful government action that helps increase construction costs. New Zealand initiated anti-dumping action against Chinese wire nails, Malaysian galvanised wire, and Thai plasterboard, among other things. And so we have a specific tariff helping to keep prices up for plasterboard. While we're trying to rebuild after an earthquake.

So one part of central government is all mad about excessive construction costs. Another part of central government penalises foreigners for selling us construction materials cheaply. Meanwhile, local government does its best to restrict the supply of land to keep property values up.


  1. Well done for raising this - another area where NZers get extorted. Just had my son in Cardiff tell me that his costs for phone, internet and sky for a year - are about the same as mine for a month. Except he has unlimited broadband and I do not.

  2. I've told you about Hola and Netflix, right? That's a $60/mth savings by cutting Sky....

  3. Inport tariffs don't drive up the cost of government procurement, because the tariff revenue should offset the extra cost. But it does, of course, screw over private sector NZ consumers.

  4. And I am very tempted, but then there is the sport....

  5. Simple model getting the opposite result: strong international competition would push costs down for domestic suppliers. Where government buys a mix of domestically produced and internationally produced products, costs of the bundle are higher where competition is more restrained.

  6. I'd check to see if there are any online sport options for Kiwis based abroad. Then subscribe to those while geounblocking.

    When we moved here, we figured out in about 30 seconds that Sky was a completely terrible, horrible, awful deal unless you got a lot of value from cricket and rugby. As we derive zero to negative utility from watching those, we saved the $60/mth Sky fee and bought a DVD box set every month instead.

  7. Its funny with the sports of other people's countries - its hard to enjoy them if you meet them first as adults. With cricket, its hard to know why I like it at all, even having been brought up with it! But I do

  8. I moved to Canada when I was 25 - I found Ice hockey very easy to get in to, but I can't stand the rest of North American sports. Especially football. I went to a CFL and they stopped the game, in the middle of the 4th quarter, to hold an awards ceremony for one of the players.