Tasmanian Constructions, a franchisee of Hotondo Homes, went into liquidation last week with unpaid business debts of about $1 million excluding money paid by customers for building work not completed. It has 40 unfinished homes on its books.
It was the latest in a string of failures – including Privium, ABD Group and fellow Hobart builder Inside Out Construction.
Liquidator Jarvis Archer from Revive Financial said supply chain delays ultimately created a terminal cash flow crisis and that fixed-price contracts were not to blame for the company’s demise. But the industry was going through a time of stress, Mr Archer said.
“We’re hearing from long-term operators that they’re experiencing difficulties for the first time in 20 to 30 years,” he said.
The ability of builders to lift prices may be limited, as state and territory laws limit changes that can be made under fixed-price contracts.
Master Builders Australia chief executive Denita Wawn said construction costs had risen by 20 per cent to 30 per cent in the past 12 months, locking many builders into a loss on existing contracts, and said the relevant legislation should be reviewed.
Ms Wawn also said building industry insolvencies were the highest they had been for two years. “That is concerning us and we are keeping a close eye on it,” she said.
The HIA’s Mr Reardon, however, said he believed most builders would trade through the current boom.
“I do not anticipate a substantial change in bankruptcies within the industry in 2022,” he said.
Liquidator Mr Archer said the builders remaining in good shape were the ones that had not overloaded on work.
“It appears that the builders that have retained steady workflows, similar to their historical levels, are less financially exposed than those that have sought to take advantage of the rapid increase in work.” he said.
Others say the same thing. ASX-listed home builder Tamawood, which builds under the Dixon Homes brand in NSW and Queensland, last year cut the number of projects on its books by between 10 and 15 per cent to ensure it could deliver projects on time even as demand and costs soared.
“Build times and starting times of some builders have been delayed,” Tamawood executive chairman Robert Lynch said.
“They would have sold houses on fixed-price contracts, which means prices have gone up so much over the last six months that so many who find themselves building now will be building below cost.”
With Michael Bleby
