Construction industry reeling as insolvencies soar even higher
There's no industry sector in Australia performing worse than construction when it comes to business failures and insolvencies.
More Australian companies are failing and the construction industry is faring the worst of all.
During the nine-month period from 1 July 2023 to 31 March 2024, more than 7,700 companies entered external administration, a 36.2 per cent increase on the previous corresponding nine-month period ending 31 March 2023.
According to the Australian Securities and Investments Commission (ASIC) data released Thursday (18 April), of these external administrations, construction (2,142), constructed represented the greatest number of company failures, accounting for 27.7 per cent of all insolvencies.
Accommodation and food services industries (1,174) represented the next highest number of company failures, accounting for 15.2 per cent.
The tentative future prospects of so many building companies is only heightened by figures released this week by the Housing Industry Association (HIA) showing new home sales in the first three months of this year remain 41.3 per cent below the same quarter in 2021, 18.2 per cent below the same quarter in 2020, and 18.9 per cent below the same quarter in 2019.
But new home sales in the month of March declined only in New South Wales (-21.6 per cent). The rest of the large states saw monthly increases, led by South Australia (+14.2 per cent), followed by Western Australia (+10.3 per cent), Victoria (+10.1 per cent) and Queensland (+2.3 per cent).
Timothy Hibbert, Head of Property and Building Forecasting, Oxford Economics Australia, suggested there may be some hope on the horizon.
“Residential commencements are near the bottom, with a low of 153,700 expected for FY2024 (-11 per cent).
“Leads have brightened, especially for houses.
“Development enquiries, land sales, and construction finance data points suggest a turning point in the coming months.”
Craning our neck to see construction sector’s future
Another indicator of the health of the development sector is the number of cranes visible on the skyline and there’s an index that measures just that metric.
Rider Levett Bucknall’s (RLB) Crane Index for the first quarter of 2024 shows crane numbers across the eastern seaboard are particularly strong, with the national figure reaching skywards to its second-highest count on record.
Sydney led the count, followed by Melbourne and Brisbane
Domenic Schiafone, Oceania Director of Research and Development, RLB, told media that the statistics were a bellwether indicator for the sector.
“The large number of cranes observed correlates with national construction activity.
“According to the Australian Bureau of Statistics, total construction activity across Australia for the 2023 calendar year was up by 9 per cent, or $21 billion, compared to 2022.”
While Sydney continued to lead crane activity, Mr Schiafone said Melbourne was seeing increased activity.
“When comparing current and historical crane numbers for Melbourne, Sydney and nationally, Melbourne bounced back after falling for the two previous counts,” Schiafone said.
“Melbourne’s count of 194 cranes has climbed above the average number of cranes in Melbourne of 175 since the same period in 2015.
“Current crane numbers in Sydney and nationally are well above their respective averages of 310 and 708.”
