Peak real estate body labels GCB Constructions’ collapse ‘frightening’

The Real Estate Institute of Queensland has described the collapse of major Gold Coast-based builder GCB Constructions as a frightening sign of what may be ahead for the industry.

Commercial building site for GCB Constructions
The collapse of GCB Constructions has sent shockwaves through the Queensland building industry. (Image source: GCB Constructions)

Queensland’s peak real estate body has responded to the collapse of 40-year-old Gold Coast-based builder GCB Constructions, describing it as a “frightening” sign of what may be still to come.

Real Estate Institute of Queensland (REIQ) CEO Antonia Mercorella told API Magazine that the building industry has faced a perfect storm of unprecedented challenges.

The latest major casualty, GCB Constructions was founded in 1981 and went on to complete major projects in south east Queensland and northern New South Wales, with offices in Varsity Lakes, Queensland, and Lismore, NSW.

Its projects included residential, commercial, industrial, retail, tourism, government aged care.

The company’s suspension meant it was unable to undertake any building work, including the construction it had in progress on developments comprising more than 500 apartments.

Stimpson and SV Partners colleague Adam Kersey have been appointed as administrators.

Among its completed projects were Rayjon Group’s $200-million Vantage project at Benowa, Buildcap’s $180-million Marine Quarter development at Southport, Steer Developments’ $51-million Côte Palm Beach and GDI Group’s Drift Residences tower at Main Beach.

Ms Mercorella described the demise of GCB Constructions, which could prove even more significant than the collapse of fellow Gold Coast builder Condev that went under earlier this year, a result of the “profitless construction boom”.

“Rising costs of materials, supply chain disruptions, and labour shortages combined with fixed-price contracts and rising interest rates have hit the building industry hard.”

“We understand that the community is concerned about the number of established and long-standing builders going bust across Australia.

“Here and now it’s a shocking loss of livelihoods, jobs, homes and money, but it’s also a frightening sign for our future housing construction pipeline, with less companies bringing new properties to market at a time we’re in a housing supply crisis.”

Builders face ‘administrative nightmare’

In late June, the Queensland Building and Construction Commission (QBCC) had terminated GCB Constructions’ ability to provide tenders, quotes or enter into any new contracts for building work without QBCC approval as well as requiring it to provide a list of debtors and creditors weekly.

Ms Mercorella said the building industry regulator could be problematic.

“The cumbersome financial reporting requirements imposed upon builders by QBCC has created an administrative nightmare for the sector.”

QBCC has suspended the licenses of hundreds of builders who have failed to provide proof of their financial health.

Ms Mercorella added that the First Home Builder Grant was a blessing for consumers but proved to be a curse for the sector.

“Many fixed price contracts signed early in the program were unable to be delivered at a profit.

“A lot of demand was brought forward, which is now borne out by building approvals being at their lowest level in a decade.

“Further high wages paid by large developers on major projects beholden to the Queensland Government’s new procurement guidelines have seen the cost of labour spiral to unprecedented levels.”

A written statement from GCB Constructions’ administrators said, “We will be working with the developers to transition projects to new builders, consciously minimising any loss to subcontractors.”

A creditors’ meeting was to be held on 7 August.

ASIC figures show insolvencies in Australia’s troubled construction sector soared 72 per cent to 2,211 in the 12 months to June 30, up from 1,284 in 2021-22.

At least five builders collapsed in the past week or two, including a high profile Perth company and a Melbourne company that left $3.3 million in outstanding debt.

Dwelling approvals continue to fall

The latest data from the Australian Bureau of Statistics released Tuesday (1 August) doesn't offer any respite to the building industry.

The total number of dwellings approved fell 7.7 per cent in June, in seasonally adjusted terms, following a 20.5 per cent increase in May.

Daniel Rossi, ABS head of construction statistics, said the fall in total dwellings was driven by the volatile private dwellings excluding houses series, which fell 21.0 per cent.

“Approvals for private sector houses decreased 1.3 per cent, following a 0.8 per cent rise in May.

“The average approval value for new houses has continued to increase year-on-year since April 2021.

“In June 2022 the average approval value for a new house was $409,900, whereas over the past 12 months this has risen by 12.5 per cent to an average of $461,200 in June 2023.”

Across Australia, total dwelling approvals were mixed. New South Wales (-44.9 per cent) and Tasmania (-35.6 per cent) dropped after strong results in May (+54.0 per cent and +40.3 per cent , respectively). Queensland (+28.3 per cent), Victoria (+26.4 per cent), Western Australia (+8.7 per cent), and South Australia (+0.8 per cent) rose, in seasonally adjusted terms.

Approvals for private sector houses fell in Western Australia (-5.5 per cent) and Victoria (-2.7 per cent). South Australia (+4.6 per cent), Queensland (+3.6 per cent), and New South Wales (+2.3 per cent), rose in June.

This article was published 31 July and updated on 1 August with latest ABS dwelling approval data.

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