Builders keep collapsing as new home starts ease

The contagion sweeping through the Australian building industry remains as virulent as ever, with more building companies hitting the wall.

Victorian construction firm Snowdon Developments went into liquidation on Wednesday (13 July) following an order issued at a Supreme court hearing.

The demise of Snowdon, which was wound up over $18m in unpaid bills and unfinished work, follows hot on the heels of another Victorian builder, family-owned Langford Jones Homes, which entered liquidation last week owing creditors more than $10 million.

Snowdon Developments is in debt to 250 creditors, and its collapse has resulted in the loss of 52 staff and left more than 550 homes at risk of not being completed.

It’s shattering news for unpaid suppliers, contractors and customers as the decision ends any hope that Snowdon Developments can trade its way out of disaster by being saved by a government bailout or being bought out by another builder, which was still a possibility while it was in administration.

At least 15 builders have collapsed since November last year and there are fears many more may soon follow.

The building industry crisis is attributed to the soaring price of materials and labour, tradie shortages, limited migration, and fixed contracts that don’t allow compensation as costs rise.

Among the more prominent casualties of the industry epidemic have been Probuild, Condev Construction, Gold Coast-based Pivotal Homes, New Sensation Homes in WA, and Pindan Group.

In the case of Snowdon, 15 creditors took the firm to court in April over the $2.5million they were owed in a bid to wind the company up on the grounds of insolvency.

But the three-month delay in reaching a decision left many of the creditors facing financial ruin, the court heard.

Three former Snowdon clients are owed more than $1 million each, the court heard, while the Australian Tax Office is also demanding $4 million in outstanding taxes.

Units offsetting fall in house builds

Commencements of detached homes fell by 11.1 per cent in the first quarter of 2022, from 33,905 to 30,145.

While this is a long way down from the peaks of the HomeBuilder boom, this is still a stronger than pre-COVID levels. It also sustains total commencements for the last 12 months at 143,037, a record high.

Housing Industry Association (HIA) Economist, Tom Devitt, said the slowing in commencements is not due to slowing demand.

“Home building activity in the first quarter of 2022 was held back by staff shortages associated with the Omicron outbreak and the higher than usual uptake of holiday leave,” Mr Devitt said.

Detached completions climbed by 10.8 per cent, from 28,098 in December 2021 quarter to 31,145 in March 2022.

“Despite the rise in completions and decline in commencement of new homes, the volume of detached work under construction is almost 80 per cent above its pre-pandemic levels.

“This was driven by the combination of the HomeBuilder grant and record low interest rates.

Other indicators, such as building approvals, finance approvals and new home sales, continue to show a strong volume of work entering the pipeline, he added.

The multi-units market is also continuing to strengthen. Multi-unit commencements increased by 1.8 per cent in the March 2022 quarter to be 29.7 per cent up in the last 12 months compared to the previous year. This improvement has been seen in high-rise and medium density units.

“With interest rates and the cost of building increasing rapidly, affordability constraints will increasingly push home buyers back towards more affordable, higher density living and with the return of migration, demand for units should continue to strengthen,” Mr Devitt said.

Western Australia has been particularly hard-hit, with new home builds plunging 32.2 per cent in the latest quarterly data, the most significant drop in almost four decades, as rising costs slow the construction boom.