2024 'worst year ever' for builders falling like dominoes
More builders are set to fold in 2024 than ever before, as labour shortages, building costs and other factors hamper the construction sector.
Just when it seemed there might be light at the end of the tunnel for the beleaguered building industry, it has emerged that insolvencies in the sector are well and truly on track to record their worst ever year.
Easing building costs and trades pressures have not been enough to stem the cascade of businesses hitting the wall.
There are now fewer construction companies to tackle the housing crisis, with nearly 3,000 absent this financial year due to the record number of insolvencies, as reported by the Australian Securities and Investment Commission (ASIC). Many of these companies left projects unfinished.
New dwelling commencements have been decreasing since June 2021, dropping about 15 per cent in the December quarter of 2023 compared to the same period in 2022.
Building and construction sector insolvencies still have some way to play out before they ‘normalise’, according to business recovery and personal insolvency specialist firm Jirsch Sutherland.
The prediction comes in light of the latest Alares Credit Insights report, which shows insolvencies among licensed building companies to the end of June were already on par with full-year totals in 2018 and 2019.
Patrick Schweizer, Director of Alares, said the building and construction industry has been particularly hard hit in 2024.
“The full-year projection for 2024 is expected to well exceed historical highs.”
Mr Schweizer said the current increase in insolvencies will continue through the remainder of 2024 and potentially into next year.
Malcolm Howell, Partner, Jirsch Sutherland, said that between January and July this year, their company had handled 60 matters so far in the building and construction sector, compared with 44 for the same period in 2023 and 78 matters in total over the 12-month period.
“There’s a real domino effect happening, and we have also seen an increase in smaller subcontractors being affected by the financial woes of head contractors.”
The HIA Trades Report released Tuesday (23 July) provides a quarterly review of the availability of skilled trades and any demand pressures on trades operating in the residential building industry.
There are signs of the acute shortage of skilled trades workers dissipating, although shortages persist and remain problematic in most areas.
“As the number of new homes under construction continues to decline builders are reporting fewer difficulties scheduling skilled trades workers on their jobs, although availability of skilled workers remains worse than prior to the pandemic,” stated Geordan Murray, HIA Executive Director – Future Workforce.
“The improved availability of trades workers is largely contained to the two largest east coast states where the larger declines in home building activity have occurred.
“Demand for skilled workers remains strong in Western Australia, South Australia and in Queensland, primarily in the capital city markets in these states,” he said.
Typifying the industry’s struggles is the plight of a household name in Western Australian home building, Nicheliving. The company has more than 200 unfinished homes and has now lost its ability to undertake further construction work because the parent company, Projex Management and Construction, does not have a nominated supervisor.
Trade shortages are continuing to contribute to rising trades prices which is pushing up the price of new homes. The price of skilled trades increased by 5.5 per cent in the 2023/24 fiscal year and new home buyers are being deterred.
Build Skills Australia estimates an immediate need for 90,000 new tradespeople, with an additional 500,000 required over the next five years to meet the Housing Accord target.
Jobs and Skills Australia highlights a shortage of tradespeople in all occupations.
As a consequence of rising industry uncertainty, the number of apprentices commencing apprenticeships in a construction trade has dropped sharply. The latest data shows that construction trade apprentice commencements are down by 17 per cent compared to the year earlier, according to the Housing Industry Association.
Housing Accord goals likely to be missed
At a time when dwelling approvals need to soar in order to meet the Federal Government’s ambitious housing targets, they are going backwards.
Over the past 12 months to May 2024, there were 164,000 total dwelling approvals, far below the 240,000 required annually. At this rate, only 820,000 new dwellings would be built by 2029. The year-old Housing Accord aims to build 1.2 million homes by then.
Karen Dellow, Senior Audience Analyst, PropTrack, said that despite lofty state and federal building ambitions, the number of new developments approved monthly over the past year falls short of what’s needed to meet the Housing Accord target.
“Multiple factors are slowing down new home construction, including industrial relations laws, a lack of critical infrastructure, and high developer taxes and charges. however, the most significant challenge remains the shortage of skilled labour,” Ms Dellow said.
“This skilled labour shortage, along with soaring construction material prices, hampers new home construction.
“Construction has already slowed due to huge infrastructure projects employing large numbers of skilled workers.
“Even with streamlined approval processes, the release of unused government land, and improvements to industrial relations laws, there aren’t enough workers to initiate projects.”
