So far this year, we have seen the liquidation of several major Australian homebuilders, including ABG Group, Privium, Probuild and Condev. Several smaller construction companies also went bankrupt, including Home Innovation Builders, Next and Hotondo Homes Hobart.
Construction giant Metricon is also said to be on the verge of collapse after the sudden death of founder and CEO Mario Biasin last week.
Co-founder of the Association of Professional Builders, Russ Stephens, recently valued that half of Australia’s construction companies are currently insolvent and believes that the recent collapses are just the “tip of the iceberg”.
This view is largely consistent with statements by Master Builders Australia, which asserts that 98% of its members see their profits plummet or lose money.
With this background in mind, Adrian Hart, head of construction and infrastructure at BIS Oxford Economics, gave a interview where he says the construction industry is facing its toughest conditions in 50 years:
“The feedback we’re getting is that these are the worst experiences they’ve ever had when it comes to cost and capacity challenges – and that includes the resource boom”…
“You have to go back to the oil shock of the 1970s to get an idea of the kind of price increases we’ve seen in the industry right now.”
“This is the worst experience we’ve had in the industry, period”…
“When companies collapse, they can often leave their employees and the entire supply chain without payment or further disruption,” Hart said.
“This can have a ripple effect on the rest of the construction industry. The Australian economy is moving a lot with construction”.
“From a broad economic point of view, it is also bad to have these kinds of situations because it ultimately leads to increased unemployment and other problems along the way”…
So where to go from here? [QUT property economist Andrea Blake] says there will be an “inevitable” downturn, possibly as early as the next 12 months.
And that should make anyone in the construction industry “nervous”.
As I said before, the building collapses occurred despite the Housing Industry Association’s predictions of scorching building levels for the foreseeable future:
“There were 75.7% more single-detached homes under construction at the end of 2021 than before COVID. There are also more homes approved and awaiting start than in any previous cycle,” [stated HIA Chief Economist].
“With this high volume of homes under construction, the number of homes under construction will remain at this high level until at least June 2023.”
As a result, Australian homebuilders are experiencing a ‘profitless boom’. They are busier than ever thanks to the HomeBuilder stimulus, but are losing money.
Imagine working your back to end up poorer? This is the situation facing the Australian construction industry.