Two other major construction companies – WA Housing Group and Individual Developments WA – have collapsed amid rising construction material costs and labor shortages.
The deepening crisis in the industry is leaving some would-be Australian homeowners with half-finished projects.
WA Housing Group, started in 2019 and reportedly owed about $1 million to creditors, with 13 unfinished projects, filed for bankruptcy on Dec. 7.
IDWA was contracted by the Government of Western Australia to build a $2.4 million public housing project – projects that were nearing completion but still needing some work.
WA Housing Group, started in 2019 and reportedly owing about $1 million to creditors, with 13 unfinished projects, filed for bankruptcy on Dec. 7. Pictured is an unfinished construction project
It tried to renegotiate a contract with the Ministry of Housing and Neighborhoods, but an agreement on a new price could not be reached.
Mathieu Tribut of liquidator GTS Advisory, told The West Australian that both companies went bankrupt as the construction costs of their fixed-term contracts rose.
“The reason (WA Housing Group) stopped trading is because, in my opinion, they were trading while they were insolvent and they were taking losses every month, so they had no choice but to close the door,” Mr Tribut said.
“They took out a bank loan, everyone lost, even themselves.”
A state government spokesman said the DHC will work with the State-Wide Builders Panel to reassign and finalize the properties IDWA was working on.
Many construction companies have collapsed during the Covid-19 pandemic. Pictured is a stock image of a female engineer on a construction site
“Before being notified of the appointment of liquidators, the Department has been in regular contact with IDWA regarding the progress of their active projects and the documentation needed to substantiate their claim under the kit,” the spokesperson said.
“The state government is supporting the industry and working closely with contracted home builders in today’s construction market, while ensuring the wise and appropriate use of taxpayers’ money.”
THE FIVE FACTORS THAT MAKE LIFE DIFFICULT FOR TRADIES
1 – Rising material costs
2 – Clogged supply chains
3 – Fuel and vehicle price increases
4 – Difficulty finding staff
5 – High wages
The WA companies are the latest to fail during the pandemic, with many struggling to find staff and difficulty finding and paying for materials due to a global shortage.
Congested supply chains due to the pandemic and war in Ukraine, along with rising fuel prices and high wages, have also contributed to problems in the industry.
Material costs have increased by more than 20 percent since the beginning of 2022, making many construction projects with a permanent contract no longer feasible.
The Reserve Bank of Australia (RBA) said this meant ‘profit margins on existing fixed-price contracts have been compressed significantly, and builders are now making losses on some contracts’.
The RBA has warned that more construction companies are likely to collapse as builders grapple with rising costs.
Some of the biggest names in the Australian construction industry have gone bankrupt in the past year, including Probuild, Home Innovation Builders, Privium, Condev Construction and Pivotal Homes.
“Overall, construction insolvencies have increased sharply, surpassing their pre-pandemic levels and accounting for nearly 30 percent of all corporate insolvencies,” the RBA said in its semiannual financial stability assessment.
“More recently, the rise in interest rates has increased the cost of servicing debt for many companies, adding to the financial strain.”
Some of the biggest names in the Australian construction industry have gone bankrupt in the past year, including Probuild, Home Innovation Builders and Privium. Depicted is a female tradie
The RBA said there could be broader implications for all of the recent collapses.
“There is a possibility that financial stress could spread to other companies within the wider construction industry and to some households,” it said.
The Reserve Bank said the crisis in the sector was impacted by “ongoing delays due to supply chain disruptions, bad weather and illness-related employee absences.”
These factors have contributed to further cost increases and delayed payment milestones.
“According to industry contacts in the Bank’s liaison programme, delays in the construction of detached homes currently average 12 weeks – and in some cases much longer,” the report said.