Another builder folds as approvals hit 12-year low
The building industry appears set for a daunting 2024, with the collapse of the Rork Group coming as dwelling approvals plummeted to lows not seen for more than a decade.
A national builder with 63 projects throughout New South Wales, the ACT, Victoria and Queensland has lapsed into administration.
The demise of the Rork Group, which comprises Rork Projects (Holdings), Rork Projects (QLD) and Rork Projects, comes as total dwelling approvals fell to the lowest level in 12 years.
The building approval figures released by the Australian Bureau of Statistics on Monday (4 March) underlined the difficult circumstances facing builders around the country.
Total dwellings approved fell 1.0 per cent, to 12,850.
Private sector houses fell 9.9 per cent, to 7,461, while private sector dwellings excluding houses rose 19.5 per cent, to 5,238.
All major states contributed to the latest decline, with the largest falls in New South Wales (-13.1 per cent) and Victoria (-16.7 per cent).
In a statement on the Rork Projects website, Director, Brian O'Rourke, attributed the company’s collapse to a “tsunami” of economic factors.
“It is with a heavy heart I announce that after 26 years of operations, Rork Projects was forced to commence voluntary administration.
“This was the final step in a long journey to find a solution for our staff, clients and subcontractors, and we acknowledge the devastating impact this outcome has on them.
“The tsunami of impossible economic conditions is smashing the construction industry with upward of 2,000 construction businesses collapsing in 2023.”
Mr O’Rourke’s statement suggested his company’s fate would likely befall others.
“Builders are in crisis because of high interest rates, labour shortages and material supply constraints following the pandemic.
“The construction market is facing one of the worst storms since the mid-1970 crisis.
“While devastating for us, it is also damaging to the Australian economy and community.”
The collapse of Rork comes on the heels of Melbourne-based construction company Apex Homes Australia and New South Wales and Canberra builder Cubitt’s Granny Flats and Home Extensions entering administration last week.
According to the Queensland Building and Construction Commission (QBCC), Rork Projects (QLD) had a licence to complete medium rise builds and was a category 3 builder which meant it generated revenue in the $12 million and $30 million range.
Building industry faces tough 2024
The prospects of an industry turnaround in 2024 appear bleak.
Maree Kilroy, Senior Economist for Oxford Economics Australia, said she was not surprised by the latest monthly movement for house approvals.
“Significant issues remain in the progression of approvals to completion and these will linger through 2024.
“Total dwelling approvals are running at 162,640 annualised (original terms), a level well below Australia’s underlying dwelling requirement.
“Our modelling estimates a significant stock deficiency of around 110,000 dwellings and we expect this to grow further in coming years.
“Volumes have been poor in January the past few years and a rebound is expected in February.
“Off a soft December, private attached dwellings moved in the other direction, up 19.5 per cent to 5,238, with apartments in Queensland were the primary driver of this uplift.”
Residential commencements are near the bottom of the cycle, with a trough of 153,700 expected for FY2024 (-11 per cent).
Ms Kilroy said some encouraging leads are emerging. Development enquiries, land sales, and construction finance leads suggest a turning point in the coming months, especially for houses, she said.
But the headwinds remained strong, according to Tim Reardon, Housing Industry Association Chief Economist.
“Approvals have been declining since the first increase in the cash rate in mid-2022 and this trend appears to be continuing into the start of 2024.
“The low volume of building approvals throughout 2023 will see the volume of homes commencing construction continue to slow this year.
“The rise in the cash rate is the primary cause of this slowdown in approvals.
“Approvals have declined across all jurisdictions, however, there is an increasing divergence among the jurisdictions as the rise in the cash rate falls disproportionately on those markets with higher land costs,” Mr Reardon said.
