There’s ‘no end in sight’ according to experts, with more building companies at risk of collapse as supply costs surge and delays increase.

Another major Queensland construction company has collapsed, reportedly leaving hundreds of customers with unfinished homes and suppliers reeling.

Residential builder Oracle Building Corporation Pty Ltd went into liquidation last week, with an estimated 300 homes unfinished.

The Queensland builder is not the first construction company to fall – and experts say it won’t be the last.  Oracle now joins a growing list of building firms which have buckled in the past 12 months, including Condev, Probuild, Privium Homes, Waterford Homes and Snowdon Developments.

Why are so many companies collapsing?

Master Builders Queensland chief executive Paul Bidwell expects more businesses to fall under due to the rising cost of construction materials and delays in supplies.

“Oracle are facing exactly the same pressures that builders – residential and commercial builders, big and small – across the country are facing,” he said.

“We’ve had this continuous rise in the cost of building material and delays in their supply and delays in the availability of labour … both have gone through the roof.”

In the past 12 months, the cost of building a house has risen by 30 per cent – and the time to build it has increased from three to four months to up to 12 months.

“And obviously, the longer it takes, the more open you are as a builder to getting whacked by a price rise, because they just keep on going up,” Bidwell said.

The chain effect of global events such as the COVID-19 pandemic, the war in Ukraine and inflation has resulted in construction suppliers increasing prices and delaying freight of materials.

Bidwell said that price gap often falls on the builder if the homeowner doesn’t “chip in”.

“That (money) has got to be found somewhere,” he said.

“And that isn’t sustainable forever. Big builders might be able to keep on doing that, and sustaining losses, but eventually, no matter how big you are, you’re going to run out of money. And that’s what happened.

“I think sadly there will be others … there is no end in sight.”

What will happen to the homeowners?

Homeowners are being left frustrated and with unfinished homes – but Beadle explains there are statutory processes in place to protect homeowners.

If a building company collapses, the homeowner will be contacted by the appointee of that particular company, or registered trustee, Beadle said.

Once the homeowner receives that advice and information, Beadle said the relevant state and territory building authorities can also help.

“There’s many insolvencies, and that wouldn’t be the first one, so those kind of places have systems that allow you to go through that process, and so it’s better to be forearmed with that information,” she said.

In Queensland, for instance, a statutory scheme covers non-completion or defects for all homes built in the state.

The insurance is paid for in the building contract, covering non-completion up to $200,000, and lasts for up to 6 years and 6 months.

With these statutory systems in place, Bidwell said homeowners shouldn’t be too worried.

“(The Queensland Building and Construction Commission) has a panel of builders. They appoint a builder, and the builder will get on and finish the job,” Bidwell said.

“There will be some that are frustrated because their home wasn’t being built fast enough for them… but they will get the house built.”

Will employees be left without a job?

It’s not just homebuyers affected – at least 70 employees from Oracle Building Corporation have lost their jobs.

Master Builders Queensland provides a voice and support for builders and trade contractors who end up in situations like the employees of Oracle.

So far, there have been no calls made to the organisation saying they haven’t been paid by the liquidated company.

Bidwill said the labour shortage in construction means these builders and tradies should find work easy enough.

“They cannot get enough tradies. They can’t get enough baristas and teachers and doctors, so we’re no different,” he said.

“There’s still a strong demand for new construction. It’s not as if we’re in a recession when it comes to the building industry.

“It’s sort of weird in that you’ve got lots of demand, but making a profit is very hard because of the delays and cost.”

Bidwell said Oracle isn’t to blame for its demise.

“This problem is not of Oracle’s making. And they couldn’t have foreseen it. Who would’ve thought we’d have a war in the Ukraine, and it would impact on the cost of building?”

Beadle predicts more pain for the construction industry.

“It won’t just be limited to the builders themselves,” she said.

“There’ll be stress that sort of flows downhill, so I think there’ll be some pain unfortunately over the next at least 12 months.

“Our members and insolvency practitioners are telling us that they have a high volume of enquiries in the building industry, so there’s going to be a lot of turmoil in the industry in the next 12 months I imagine.”

Source:

https://www.news.com.au/finance/business/other-industries/oracle-liquidator-issues-dire-warning-over-relentless-cycle-which-could-see-more-construction-companies-collapse/news-story/8786451947248a18bfe93c361591cc99

https://7news.com.au/news/no-end-in-sight-more-building-companies-at-risk-of-collapse-as-supply-costs-and-delays-increase-c-8012671