Mum-of-three escapes living in a TENT thanks to a TV appeal after the company building her new home collapsed – but fears thousands of others caught in Australia’s construction bust WON’T be so lucky
- Families have been shattered as builders go bust during construction projects
- One family were left facing living in a tent after their builder left them homeless
- Industry experts now warn the situation will get worse before it gets better
- Crash has been caused by a perfect storm of rising costs and fixed contracts
- A government stimulus initiative during the pandemic fuelled the fire too
A pregnant mother-of-three was facing bringing up her newborn baby in a tent after her builder was caught up in the turmoil that’s slammed the brakes on Australia’s once booming construction industry
Pivotal Homes in Queensland went into receivership last month, leaving pregnant Tara Ferguson and partner Brodie Lehner and their three children homeless.
The family were set to move into a borrowed tent with their newborn child – but have won a vital reprieve after a plea on TV found them a new temporary home.
They among the thousands of victims of the perfect storm hitting Australian builders sending companies broke at record rates and shattering family dreams of home ownership.
Even if their builder stays solvent, many are facing months of delays before they can move into completed homes.
Pivotal Homes in Queensland went into receivership last month, leaving pregnant Tara Ferguson and partner Brodie Lehner homeless and facing life in a tent
Many families are now left with half-finished homes or projects that never got off the ground beyond laying the basic foundations before the constructors collapsed
They had paid Pivotal $250,000 in advance to build their new home in Gleneagle on Queensland’s Gold Coast before the company hit the rocks.
Ms Ferguson said she was stunned when she was told her dream home had been abandoned by the builder.
‘You have got to be joking,’ she said when the news broke. ‘This is not real, this is not happening.’
Construction had been signed off in March 2021 but work still was incomplete more than a year later and could now be delayed for months awaiting an insurance payout.
They faced being homeless when the lease on their current rental property runs out just before their fourth child is born.
‘The last resort is a tent,’ she admitted to Nine’s Today show. ‘We’ve got a tent lined up from some friends of ours.’
But Mr Lehner added: ‘We have a a newborn on the way. We can’t bring that newborn up in a tent.’
Tara Ferguson and Brodie Lehner had paid the firm $250,000 in advance to build their new home in Gleneagle on Queensland’s Gold Coast before the company hit the rocks
The family have since managed to arrange a new rental property after TV appearance while they wait up to four months to see if their insurance will pay out.
The epidemic of construction companies going broke has robbed thousands of Aussies of their dream home and cost many their lifesavings.
Many families are now left with half-finished homes or projects that never got off the ground beyond laying the basic foundations before the constructors collapsed.
In the past week another three businesses have crashed, including Victorian builder Langford Warren which has yet to complete Donna Taylor’s home after 18 months.
The $365,000 project on Phillip Island still only has the wooden frame erected and also faces months of delay while insurers assess the case.
‘My dream is gone,’ the local postwoman told news.com.au. ‘I am totally devastated like so many other people. Tears are rolling down my face.’
The collapse of the almost 50-year-old company followed that of fellow Victorian firms Wulfrun Construction and Westernpoint Construction Pty Ltd which both went into liquidation last Wednesday, with administrators already appointed.
Government initiatives, spiralling raw material costs, fixed price contracts, supply chain problems and weather and covid delays have thrown the industry into chaos.
Profit margins of just around three per cent have been wiped out by costs rising between 25 to 75 per cent, inflicting massive losses on the bigger construction companies.
And experts warn there is much more pain on the horizon.
‘This will get worse before it gets better,’ Russ Stephens, business strategy specialist at the Association of Professional Builders, told Daily Mail Australia.
‘It’s just gathering momentum now – the next six months are going to be particularly hard, and then we hit Christmas and that shutdown could be the final nail for many.
‘We don’t know how many more are going to fall over. There’s nothing that’s going to stop what is going to happen unfortunately because the losses are just too big.
‘It’s currently about two a day who are going under.’
Government initiatives, spiralling raw material costs, fixed price contracts, supply chain problems and weather and covid delays have thrown the industry into chaos
Almost a third of all firms which crashed last year were in the building sector, more than any other company type, new figures have revealed,
The majority of them were small business bosses and sole traders caught in the same traps as industry giants like Probuild which combined to bulldoze the industry.
‘Small-scale operators in construction could well be the canary in the coal mine for the difficulties that lie ahead for this sector,’ said Equifax’s Brad Walters.
‘Construction insolvencies across the months of April and May were 47 per cent and 43 per cent higher, than last year.’
Nearly half of those going insolvent had been operating for 10 years or more. Other big names hit by the devastating downturn include Privium, BA Murphy, Condev, ABD Group and Waterford Homes.
A government stimulus package in the early days of the pandemic inadvertently stoked up emerging problems in 2020, says Mr Stephens.
In the early days of the first Covid lockdown, many families took the chance to design and commission new homes, rebuilds and renovations.
Construction companies were already close to being fully booked in May 2020 when the Coalition government announced a stimulus package offering homeowners massive $25,000 construction grants under the HomeBuilder scheme.
Russ Stephens, business strategy specialist at the Association of Professional Builders, has warned things will get worse before they get better
‘That poured fuel on an already raging fire,” said Mr Stephens. ‘Builders were signing a lot of contracts already, but those incentives just led to even more demand.
‘Whoever was advising the government obviously wasn’t aware of how the industry operates. So they threw money at the industry in a panic to try and prop it up.
‘And they just made things worse…’
The massive surge in work left the biggest companies at most risk as their sales teams committed the companies to work at fixed costs, often signing up two to four times their normal level of business.
But the sudden surge forced prices sky high as the cost of raw materials rocketed in response to the demand, along with supply chain problems.
Prices of materials have been rising steadily since the start of the pandemic, but exploded in April and May last year (average prices of commodities – Arcardis statistics)
Staffing costs also soared with some in-demand tradies and specialists being headhunted by rivals for twice their previous salary.
The industry was also hit with delays caused by Covid shutdowns and then the La Nina deluges stopping work on sites across the eastern half of the country for weeks on end.
Now companies up and down the country are committed to fixed cost contracts which are losing them money hand over fist.
The worst affected are the bigger companies with sales teams who booked in record amounts of business at prices they can’t sustain, with profits smashed by the rising costs.
Smaller companies have also been bit but are better protected as they have committed to fewer jobs and are more likely to be able to cover their losses.
Others are renegotiating the cost of contracts before starting work to account for the change in the economy, and offering customers their deposit back if they choose not to proceed.
But Mr Stephens admitted some unscrupulous builders are starting work on projects at the fixed price, only to stop halfway through and hold families to ransom to complete the job.
‘That’s completely unethical,’ he admitted. ‘That gives the industry a terrible reputation. And it’s not fair on the consumers either.’
Jon Davies, CEO Australian Constructors Association, echoed Mr Stephens’s concerns and said the Russian-Ukraine war had also impacted costs, driving up the price of steel and concrete.
But he said customers simply needed to pay more to cover the increased expenses and ignore the contracts and quotes they had been given.
Profit margins of just around three per cent have been wiped out by costs rising between 25 to 75 per cent, inflicting massive losses on the bigger construction companies
‘The big issue is that the construction industry is unable to pass these price increases on,’ he told Daily Mail Australia.
‘Service stations can increase prices within hours of the oil price going up, yet construction companies are expected to provide fixed prices for 12 to 18 months or even two to three years.
‘Double-digit inflation for an industry with single-digit profit margins is a recipe for disaster.
‘Delaying or cancelling projects is not the solution as the impact to industry will be greater than the problem of material price increases.
‘Clients urgently need to work with contractors to compensate them for these unforeseen additional costs, irrespective of the contract they have signed.’
He said that in the future, the government needs to overhaul the entire system away from contractors competing on price alone.
He added: ‘Instead, we should be encouraging competition on overall value for money considerations such as productivity, innovation, environmental sustainability and improved social outcomes.’