Australian building industry on the brink of collapse with half of firms in trouble


Australian building industry on the brink of collapse with HALF of firms in trouble as prices for raw materials surge

  • Industry has huge financial challenges, said Association of Professional Builders 
  • Thousands of tradies have gone broke in recent times as building firms collapse 
  • Calls for escalation of fixed price contracts under $500,000 to be allowed 

Australian builders are on the brink of going bust due to soaring raw material costs for fixed price contracts.

The industry is facing huge financial challenges, according to the Association of Professional Builders, and half are struggling to make a profit. 

Thousands of Australian tradies went broke in recent times as building firms collapse amid skyrocketing commodities prices. 

APB wants escalations of fixed price contracts under $500,000 and said help was needed to stop a collapse in the industry, now mostly affecting larger firms.

‘At the back end of last year it was more the smaller builders (who were struggling) and the bigger ones had cash reserves,’ APB co-founder Russ Stephens said.

Around half of Australia's home builders are on the brink of going bust due to soaring raw material costs for fixed price contracts. Pictured is a female tradie

Around half of Australia’s home builders are on the brink of going bust due to soaring raw material costs for fixed price contracts. Pictured is a female tradie

He said the change is due to large building companies signing so many contracts under government Covid stimulus plans.

Some companies agreed to four times more contracts they would normally sign in that period, Mr Stephens told the Herald Sun.

He said many of the companies were not able to build the amount of properties they signed up for, which caused a backlog.

Then price inflation caused by factors such as the war in Ukraine meant some bigger companies were losing money on projects because the price of the contract was locked in.  

State governments are considering loosening requirements for builders to retain their licence and other measures to help them get through the crisis.

Surfers Paradise builder Pivotal Homes, one of Queensland’s biggest home builders, went into liquidation late last month.

The company, which was a category three builder licensed for low-rise jobs up to $30 million, has 16 full-time employees. 

The company, a former sponsor of the Gold Coast Titans, said increased labour and construction costs meant the business was no longer viable.

Surfers Paradise builder Pivotal Homes, one of Queensland's biggest home builders, went into liquidation late last month. Pictured is a stock image of a man painting the side of a house

Surfers Paradise builder Pivotal Homes, one of Queensland’s biggest home builders, went into liquidation late last month. Pictured is a stock image of a man painting the side of a house 

‘In my 30 years’ experience I have never seen a set of circumstances like this and obviously we are not alone in these unfortunate conditions facing the industry,’ managing director Michael Irwin said.

Supply chain issues and lack of stock from national and international sources led to a spike in demand and prices for materials.

Costs of metal ores, plastic, and timber have been consistently rising for years, but particularly through the pandemic as factories were forced to shut down for extended periods.

Last month, two Perth construction firms went under just days apart.

Thousands of Australian tradies have gone broke in recent times as building firms collapse. Pictured is a house under construction

Thousands of Australian tradies have gone broke in recent times as building firms collapse. Pictured is a house under construction

The formal appointment of liquidators for Home Innovation Builders was lodged with the Australian Securities and Investments Commission, just after New Sensation Homes was placed in the hands of WA Insolvency Solutions.

Gold Coast firm Condev, Brisbane company Probuild, and Hobart’s Hotondo Homes are among the other companies to collapse in 2022.

One of Australia’s biggest home builders, Metricon, recently countered rumours it was under financial stress by injecting $30 million into the business.

Governments measures to help builders could include relaxing the rules for licences that require evidence of their financial state until material costs come down.

Probuild owes $14million to its workers (pictured) and unknown amounts to more than 2,300 creditors as the Federal Court was told the embattled building construction giant is in a 'nightmarish' situation

Probuild owes $14million to its workers (pictured) and unknown amounts to more than 2,300 creditors as the Federal Court was told the embattled building construction giant is in a ‘nightmarish’ situation 

Mr Stephens said about half of all builders were thought to be running at a loss and this could lead to a massive collapse.

He said Australia was the only country without cost escalation clauses in contracts, which ‘is why the US and Canada are still going strong’.

‘Consumers will need to hold sufficient reserves to cover that risk. We can’t expect businesses to continue carrying that amount of risk,’ Mr Stephens said. 

‘Nightmarish’ cost of Aussie construction giant Probuild’s collapse is revealed as tradies and creditors are left owing an eye watering amount 

Probuild owes $14 million to its workers and unknown amounts to more than 2,300 creditors as the Federal Court was told the embattled building construction giant is in a ‘nightmarish’ situation.

More than 1,000 directly employed workers’ livelihoods are in jeopardy – along with contractors and sub-contractors across a long supply chain – after the firm was placed into administration by its South African parent company last week.

Barrister Hamish Austin, acting for Probuild administrator Deloitte, on Wednesday told the Federal Court that 786 workers across 19 different projects were out of pocket.

He said the best-case scenario was to maintain operations while a buyer was sought.

But he said administrators needed more time to identify who owned all sorts of items from tools and scaffolding to leases. 

‘The mind boggles at the amount of work the administrators are required to get across,’ Mr Austin told the court.

‘And you’ve got the nightmarish prospect of construction projects ongoing in real time, (with) any disruption likely to be extremely costly.’

Mr Austin added that about 300 more creditors had been identified this week who appeared unaware of a planned meeting on Friday relating to the administration.

‘We don’t want a meeting where we have a significant body of creditors who aren’t present,’ he said.

Justice Jonathan Beach granted an extension for the administrators to locate all relevant property and creditors.

Probuild’s parent company, Johannesburg-listed builder Wilson Bayly Holmes-Ovcon, last week said it was pursuing ‘several options’ to raise the capital needed for Probuild to continue, with Deloitte appointed as administrator.

Two other businesses under WBHO Australia – Monaco Hickey and WBHO Infrastructure – were also placed into administration.

Deloitte is planning a sale and recapitalisation process to secure a new owner for the businesses.

WBHO has blamed Australia’s ‘hardline’ Covid-19 border closures, lockdowns and months of enforced working from home rules that emptied city office blocks and shopping malls.

‘The protracted effect of Covid-19 has delayed any meaningful economic recovery and procurement activity in Australia,’ the firm said.  

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