Thousands face financial ruin as home builder collapses mount

By in Australian Economy, Australian Property

| 32 comments

Australia’s home building industry continues to collapse, with 16 large firms already winding up and many more on the brink of going under.

The list of collapses is long and includes: Privium, BA Murphy, Hotondo Homes Hobart, Probuild, Condev, Inside Out Construction, Dyldam Developments, Home Innovation Builders, ABG Group, New Sensation Homes, Next, Pivotal Homes, Pindan, ABD Group, Solido Builders and Waterford Homes.

All have collapsed since December 2021.

Australia’s biggest home builder – Metricon – is also teetering on the brink and has engaged in crisis talks with both the NSW and Victorian Governments, as is Victorian builder Snowdon Developments Pty Ltd.

Experts believe this is only the tip of the iceberg. IBISWorld this month reported that insolvencies are “trending upwards” in the home construction industry:

Construction insolvencies

IBISWorld also predicts that home construction enterprise numbers will decline by 9% in 2022-23, “contracting for the first time in a decade” by thousands:

Home construction outlook

The Morrison Government’s HomeBuilder stimulus has exacerbated the problems facing the home building industry, since it drove a massive lift in new home demand at the same time as inputs became increasingly scarce.

Builders signed a huge number of contracts at fixed rates and then competed with each other for scarce resources, which drove costs even higher. Then construction times blew out as input costs continued to skyrocket.

The end result is that Australia’s home building industry has been caught in a loss-making boom. While volumes are booming, builders are bleeding money at an alarming rate. Accordingly, many builders have gone bust, with many more to follow.

Rather than ‘saving’ the building industry, the Morrison Government’s HomeBuilder stimulus instead hastened its demise.

Unconventional Economist
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Comments

  1. The Travelling PhantomMEMBER

    I wonder why all these builders decided to go bankrupt at once. Not happy with their contracts? …easy declare you broke and move to next project that pays more

    • Prometheus69

      Yep …. it is FAR too easy for Builders to be dodgy and considering the outlay of money, the consumer protection in residential building is laughable.

  2. LukeMEMBER

    I’m a few months from my build getting completed. I signed up to creditor watch I know these things are delayed but smooth sailing so far for me. I just want to move in and whatever happens after that I dgaf.

  3. Matchbox

    And this is why house price declines will be contained.
    Supply is going to dry up really quick.
    Don’t be surprised if dwellings will be back to the lows of 2012

    • Robert

      Nope, the collapse of builders will trigger realised losses, causing financial contagion and job losses. Same as Spain and Ireland, half completed projects will litter the landscape.

      • The Claw

        Irish scoundrels choked supply for decades and then unleashed reckless “oversupply” in all the wrong places. There was a lot of half-completed “bubble stock” in unpaved and unserviced new estates 2hrs drive from employment.

        The Irish scoundrels make the Aussie scoundrels we elected look like good planners.

    • DingwallMEMBER

      Supply was the problem in the first place. Hard to dry up something already dry

      • Jumping jack flash

        The demand we see and experience for pretty much everything at the moment has a fairly robust component of “false demand” created purely by the availability of and spending of debt.

        Absolutely everything is affected by this, but especially houses and builders because they’re at the coal face of debt-fuelled demand.

        And by “fairly robust” im being conservative. The false demand component of our total demand for anything, due to debt growth and debt spending, is almost certainly greater than 50%, but we will certainly see very soon as the debt growth and debt spending subsides

        • TRADINGtheAPOCALYPSE

          It’s OK our children and children’s children’s childrens children will sort the debt for us!

        • Absolute BeachMEMBER

          Yep. This wash out was baked in. 0.1% rates? Really? Then add in dodgy mortgage brokers and APRA asleep at the wheel.
          The big question is who actually thought this was a sustainable path to prosperity in Oz?

        • The Claw

          “false demand” eh?

          I guess that 20 Indian taxi drivers jammed into a 3-bed house would create very little “demand” for housing if they cannot get access to credit.

          They don’t have any demand, but they have a great need for better housing!

    • kannigetMEMBER

      Last census data was just released, 10.2% unoccupied private dwelling across the country, 8.3% in sydney, 10% in melbourne and only 6.8% in brisbane. These are developed, established properties, not under development estates.

      This basically is 1 Million vacant established homes.

      and no, its not explained by “chinese land bankers”, “They were out of town that weekend” and “property under construction / renovation”. The difference between greater NSW and Sydney is only 3 percentage points, chinese investors and land bankers favour metropolitan areas so you would expect a greater proportion in metro areas..

      Air BNB does factor in this to a small degree, but popular regional areas only see a few percentage points difference.

      There is in fact a surplus of unoccupied dwellings across the country despite the claims of shortages. Once land banking for capital gain becomes unattractive then it we will see a turn.

      • The Travelling PhantomMEMBER

        Indeed, i know many vacant places, oweners want to sell while those places are still pristine. Tax every vacant property what’s equivalent to it being rented and I bet the rental market and the selling market will be in much healthier numbers

      • The Claw

        Absolute rubbish.

        There is a shortage of decent housing available to people who need it.
        This 10% unoccupied dwellings is normal and constant. Much of this is explained by housing that is just about to have new owners or new renters move in.
        Some is 2nd homes of rich people. Some are the homes of oldsters who are now in nursing homes but refuse to sell. Some are damaged and awaiting approvals or work.

        Younger and poorer people do not need the false supply promised by all these unoccupied dwellings. They need real supply of real dwellings that are available for them to move into and live in.

        • kannigetMEMBER

          The vacancy rate has been going up each time by about 2% points. This is the first census it actually didn’t go up since 2001.

          There are roughly 500,000 house sales each year across the country but as the census is a spot in time you have to consider the weekly data. If there are 500k a year then that 10k houses sold each week, you have to then count those under transition between owners. But as you add 10k each week and remove 10k each week the number is actually pretty static. I would suggest it’s actually not much more than the 10k sold each week but I will be really generous and suggest it’s as much as 100k.

          As for the second home / holiday home reason, they are still vacant, meaning they are a home not available to someone to live in.

          The traditional 2nd home location for cashed up ACT bogans is the Bateman’s bay/Eurobodalla region. That area had around 22% vacancy rate. If half those vacant homes were holiday homes it would make up roughly 1000 homes. ACT has about 150k homes so it equates to about 0.6% of ACT residents have a holiday home.

          ACT is fairly affluent compared to most other regions in Australia so I think it would be a hard stretch to say they are low on the holiday home scale. So if we take 1% as the holiday/second home, then we still have to find another 800k homes.

          Are you seriously suggesting that the other 800k vacant properties are vacant because they are being renovated?

          They don’t count under construction / new estates as they are not existing homes.

          Each quarter about 6k homes are demolished for reconsideration.

          I still can’t find the other 795k homes…..and that’s after being extremely generous on my counts so far

          So I call bullshit on the idea they are all in the “flux of moving between homes’ argument.

          I will agree there are not enough homes people actually want to live in, but the data also doesn’t suggest they vacancy rates are all in high commute distances from CBD. Sydney northern beaches still had a 7.5% vacancy rate. Most inner city areas of Sydney were above 7%

        • Hooksey

          Claw,
          It would be pretty rare for a person who owns a house to go into a nursing home and be able
          to leave the the house empty. When you enter a nursing home you have to list your assets which would include the
          the value of the house you own. The weekly fees you pay include an assets test fee no matter if you are poor
          or loaded. It’s currently about 5% of your assets per year. That’s on top of all the other fees plus 85% of your pension – if you are on a pension.
          Correct me if I am wrong but it doesn’t matter if you go into a private or Gov. run NH. They don’t miss you!
          Keeping the house MT would be a very expensive decision.

    • billygoat

      The supply lie that won’t die: my grate eon
      Nothing more nothing less
      Plentiful supply of ‘cheap’ unaffordable housing.
      ONE MILLION EMPTY HOUSE$ AUSTRALIA WIDE: holiday houses, second homes, Airbnb fur rain nationals not living in Oz but own house, cheaper to keep empty & enjoy capital gain (thanks Chy nah & Indah four rain nationals newly minted as ‘Australian some since just weeks before covid mock downs featured on ABC tonight as changing face of Australian demographic & identity as revealed by 2021 census so not ray cyst cos ABC celebrating changing if the guard:((

      • The Claw

        Blah blah. I have an unused tent in my shed.
        Don’t you complain to me about a shortage of housing for you. That tent represents oversupply!

  4. Hill Billy 55MEMBER

    The pro cyclical musings of Joshie and the RBA have created all manner of heartaches for a lot of ordinary people. Pity the later are the ones who will suffer the repercussions.