Why is the cost of housing so unaffordable?

For years, Aotearoa has been plagued by a runaway housing market. Tāmaki Makaurau has one of the least affordable property markets in the world, and home ownership is becoming increasingly difficult to achieve, particularly for people in their 20s and 30s.

Compounding this issue is the cost it takes to build new homes.

Construction costs are rising at the fastest pace in four years. The Productivity Commission recently estimated people in Aotearoa pay between 20 and 30 percent more for building materials than our friends across the ditch.

Late last year, the Government announced it would be launching a probe into the residential building sector, investigating competition in the sector (which is dominated by two main players - Fletcher and Carter Holt Harvey), and whether we are paying too much for building materials.

Just like the supermarket sector, if there is a lack of competition in this industry then the big players may be able to charge higher prices for building supplies, which ultimately trickles down to the consumer and the price we have to pay to both build and purchase homes.

As an iwi developer who builds homes for our whānau and the general market, we welcome this probe into the building material market.

While the findings and recommendations aren’t due until December, a draft is imminent. If a lack of competition is identified, we hope the report pushes for a strong response, to really help consumers, including whānau looking to buy a whare and iwi like Ngāti Whātua Ōrākei who are building papakāinga housing.   There was general disappointment with the recent report on the supermarket sector, and we don’t want to be disappointed again.

In the meantime, there is pressure on the availability of building materials and labour due to disruptions caused by the Covid-19 pandemic.

We’ve not been immune to these impacts at Whai Rawa. But our Development Team and contractors have managed these pressures well as we build 29 houses at Oneoneroa, 16 of which will be for sale later this year.   

We’ve recently announced that we will build approximately 35 brand new homes for whānau to purchase and/or rent in Ōrākei to be completed by the end of 2023. As we progress with this and other developments in the year ahead, we will look to face the challenges of the construction industry head on and manage supply constraints and rising costs as best as we can.  

This is a complex issue and there’s no silver bullet.  But the Commerce Commission probe into the sector could help – we’ll update you when we know more.