The price is wrong

The price is wrong But Ling's reference to "our market" suggests an all-too-comfortable dominance of New Zealand's construction scene by Fletcher. Precious capital is directed into servicing massive mortgages and away from more productive endeavours such as new business investment. The sector's deficiencies are deeply entrenched: it's unlikely to be able to sharpen its pencil quickly or easily. In the latest contribution to the home-affordability debate, the Productivity Commission has released the results of a major investigation, which has received attention mainly for its controversial proposal to free up more land at city fringes for new housing developments. Close to fifty percent reported the final cost ended up being greater than predicted. There are many complex reasons for the high costs and underperformance of the building industry, including its dominance by one-man carpentry firms building bespoke homes who lack economies of scale. A survey of homeowners who obtained building consents for residential building in 2005 found almost one in five ended up in a major dispute over their project, often as a result of poor workmanship or a failure to meet contractual obligations. The cost of building a mid-range home in Auckland, for instance, is about NZ$1650 a square metre; to build a similar home in Melbourne costs NZ$1175 a square metre, in Brisbane NZ$1209 and in Sydney NZ$1309. The commission compared the prices of 15 building materials, ranging from bricks and insulation to framing timber and plasterboard, and found 13 were cheaper - in most cases substantially - in Australia than here. And because New Zealand is small and geographically isolated, it has traditionally had little appeal for international manufacturers. The commission says lifting the productivity of the building industry would have "immense" benefits for housing affordability. Companies seeking to have new products accepted here must first win the approval of building consent authorities, that can be a time consuming and uncertain process. These are problems not only in relation to new home construction - they also directly influence the cost of maintaining and renovating older homes. And although our borders are theoretically open to the global market in building supplies, in practice it's not that simple. The commission also cites research showing the labour productivity of the building sector in 2001-06 was just 72% of Australia's. Low-income families are forced tolower their costs by cramming more people under one roof, with damaging effects on health and educational achievement. First-home buyers are increasingly locked out of the market (home ownership rates have fallen from 75% in the early 90s to 65% now). The price is wrong Trade News selected by Local Linkup on 07/05/2012