New Zealand Slashes Tariffs to Rein in Building Costs

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Monday, July 7th, 2014
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As building markets in Christchurch and Auckland continue to gather momentum, the New Zealand government is seeking to curtail construction costs by suspending tariffs on the majority of building materials for at least five years, wiping more than $NZ25 million off government revenue in that time-frame.

As of July 1, the import tariff rate on a list of materials which together comprise about 90 per cent of the materials’ cost for new housing was reduced to zero per cent and will stay at that rate until at least June 30, 2019, Housing Minister Dr Nick Smith and Commerce Minister Craig Foss said in a joint statement.

The list includes roofing, cladding, framing, windows, doors, insulation, plumbing and electrical components, fixed cabinetry, paint and builders’ hardware and fixings.

The government says the move, which comes on the back of the temporary removal of anti-dumping duties for building materials in the most recent Budget, will cost around $NZ5.5 million per annum in lost revenue but will reduce the cost of building a home by an average of around $NZ3,500.

While acknowledging local production of as many materials as possible was desirable, Smith said cost pressures were likely to build as the Christchurch rebuild progresses, and that the reduction reflected the need to address long term challenges regarding housing affordability.

New Zealand is a small market for building materials. While we would prefer as much content as possible is locally manufactured, we need the competitive pressure of imported products to ensure we are getting best value for money,” Foss said. “It is through competition and choice for consumers that we keep costs down.”

The latest moves come amid fears of upward pressure on building costs within New Zealand as the Christchurch rebuild continues and strong population growth drives demand in Auckland.

Although Statistics New Zealand figures indicate that building material prices rose by only 1.2 per cent on average over the 12 months to March, recent data suggests consent levels for residential construction are at six-year highs and commercial building consents are also rising – a phenomenon which could place upward pressure on the availability and price of materials.

Along with action regarding material prices, the government is also trying to boost land supply.

On Monday, Cabinet approved a third tranche of ‘Special Housing Areas’ earmarked for land releases and fast-tracked urban development in Auckland.

Last week, meanwhile, the government signed an accord with the Wellington Mayor to free up dwelling supply in the capital city.

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