In what could be a precursor for the US housing industry, construction companies in Australia’s NSW (New South Wales) which includes Sydney, are experiencing severe cash flow problems forcing some into voluntary bankruptcy.
A building insider, who works for one of the NSW’s largest construction companies in NSW, has warned the situation in the industry is only “going to get worse” after a string of collapses in the sector, as the price of building homes blows out between $40,000AU and $100,000AU.
His employer builds between 450 and 500 homes a year but he said “outrageous” price gouging from suppliers has helped send the average price of a house in NSW up from $330,000AU to $440,000AU in the last 12 months and the saddest part is it’s mostly Australian manufacturers taking advantage of the lack of import plus supply and high demand.
The trades are also part of the problem. They know they can easily walk off the job – forget about loyalties – they will walk off site and take more money for a retail job or another builder job for a week as they know there is nothing the builder can do.
It’s insulting that manufacturers and suppliers are publicly bragging about profits at the same time building companies are begging for support and prices to be fixed but instead are hit with big price increases.
Two major Australian construction companies including Gold Coast-based Condev and industry giant Probuild have already gone into liquidation this year, alongside smaller operators like Hotondo Homes Hobart and Perth firms Home Innovation Builders and New Sensation Homes.
High rise builder ABG Group also went into liquidation last year too, as well as Queensland outfit Privium Home which impacted more than 2000 home buyers and left creditors owed close to $43 million.
The builders you are seeing going under now are the tip of iceberg as the cash flow impact on builders is severe.
There are not many builders making money at the moment – they are building for practice and survival.
Will the unique situation in NSW find its way to Europe and the US? That is a question that should be addressed now.
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Gary Fleisher is the Editor in Chief of Modular Home Source and Offsite Builder. Email at [email protected]
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