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Something stinks in Godzone

30 November 2018

New Zealand has a housing crisis.

This is especially true in the rental property market where tenants are finding it increasingly difficult and expensive to find a place they can call home.

The government's response is to instigate schemes that will help Kiwis build homes but, given the cost of even the most modest dwelling, this seems like a joke on the poor.

The real question that has to be asked is "exactly why is it so damned expensive to build a house in New Zealand?"

Indeed, that is the question being asked by Warehouse founder Stephen Tindal in this story on the NZH.

It seems that in many or maybe even most other countries, the cost of building a new house is a fraction that of building an equivalent dwelling here in Godzone. Why the hell is that?

One of our key industries is the timber industry. We have huge plantations of pine and that pine is the primary building material in this country.

So, as I have asked many times before, why is it that someone in Sydney (1,500 miles across the Tasman) purchase Kiwi timber for less than it costs right here in NZ?

What kind of twisted economics are skewing the cost of raw materials to this extent?

Economies of scale?

I don't believe it. Although Australia is a larger country with more people, their houses tend to use less timber than Kiwi homes. Brick veneer is the construction of choice over the ditch, requiring only framing timber. Here in NZ, we tend to not only frame out houses with pine but we also clad them with the stuff, resulting in far more "wood per house" than the Ockers use.

It's also unlikely to be labour costs. The average wage here in NZ tends to be markedly less than the average wage in other developed countries. With this in mind, the cost of the man-hours needed to erect a house should be lower here than elsewhere -- unless our builders are incredibly slow and useless -- which I doubt.

Perhaps one of the real clues to why we pay so much comes in the form of compliance costs.

Building consents, resource consents, planning consents... these all cost an arm and a leg and can actually constitute a significant proportion of the total build cost. This wouldn't be so bad if these consents came with some form of guarantee but, as those who were unfortunate enough to end up with a leaky building soon discovered, paying a fortune to have your house ticked off as "compliant" and councils seem to operate on a "zero responsibility" basis when they empty your pockets.

I also note that Fletcher Building, NZ's dominant player, is suffering huge hurt at the moment, suffering massive declines in profits despite the incredible cost of houses in NZ. Does this mean that the real costs lie outside the construction industry -- perhaps again pointing at the whole consent and local government burden on home-builders?

To be honest, I don't know -- but I do know that there needs to be a huge government investigation into exactly why so many Kiwis will never be able to afford a home due to the incredibly high cost of building.

When even a relatively modest new home costs half a million dollars or more, that money has to be going somewhere -- I want to know where. Obviously someone is making a killing -- at the cost of home affordability for regular Kiwi folks.

Surely it's the job of government (especially a left-leaning one) to find out where the problems lie and to fix them. If not, this whole Kiwi Build thing is nothing more than a cynical joke at the cost of honest, hard-working Kiwis.

Jacinda... the challenge has been made... let's see if you're up to the task.

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