Two more Australian construction firms have failed, causing the abrupt cancellation of millions of dollars’ worth of projects and leaving homeowners in the dark.
On Wednesday of last week, the Victorian businesses Wulfrun Construction and Westernpoint Construction Pty Ltd entered into liquidation, with administrators already in place to handle the situation.
They are the most recent to go out of business during the epidemic, with many having trouble hiring workers and having trouble finding and paying for materials because of a global shortage.
A father of two who was seeking to renovate his long-held property claimed to have lost $300,000 as a result of Wulfrun going bankrupt. He believes there may be hundreds of other families who are similarly placed under extreme financial strain.
The man called Mark explained, “The fundamental emotion is that dread of losing your home, that parcel of property that has been in my family since the 1980s, where you grew up and spent your youth.”
The government must become more involved, according to Matthew Mackey, Executive Director at engineering behemoth Arcadis, or risk a complete collapse of the home construction sector.
“To ensure progress, there needs to be increased collaboration at all levels. We won’t be discussing collapse of the building industry, but rather a total absence of employment,’ he said.
The profitability of firms was being destroyed by spiraling material costs, congested supply chains, rising fuel and vehicle prices, trouble hiring workers, and exorbitant pay.
According to a research by the jobs website Hipages, 85% of tradespeople have raised costs in the past year, with more than half being obliged to do so in the last three months.
Workers claim that raw materials are the main cause of cost increases, with the price of metal climbing 15% over the past year and the price of timber increasing by at least 20%.
Wulfrun Construction’s liquidation is being managed by BDO Australia, who declined to comment on how much money the company still owes in debt.
According to a spokeswoman, “The liquidators are gathering background data regarding the company’s problems and have spoken with the building insurer over the company’s unfinished projects.”
Creditors will receive an update in the first report on June 8, 2022. At this time, we are unable to comment further.
Mark claims that finishing his home, which had the framing put in before construction was stopped last year, will cost an additional $560,000, on top of the $60,000 he has to fund to cover two years’ worth of rent.
Pitcher Partners will handle Westernpoint Construction Pty Ltd throughout its own insolvency, and a spokeswoman for the company claims they have already begun dealing with one distraught homeowner.
According to the representative, “We are aware of one homeowner who has been adversely harmed by the company’s failure.”
Before deciding to wind up the corporation, the homeowner had to file a claim for damages against the company with the Victorian Civil & Administrative Tribunal.
“We will now look into any further prospective creditors and the total amount owed.”
Metal ores, polymers, and wood have all seen steady price increases over the years, but the pandemic saw a spike as a result of the prolonged shutdown of manufacturing abroad.
Many businesses, in my opinion, don’t seem to be taking the cost rises seriously. According to Matthew Mackey, executive director of the engineering firm Arcadis, “it’s a perfect storm.”
“Smaller enterprises do not have the same cash flow or safety net.” They will experience the pain much more quickly and intensely.
Despite currency effects, Covid-related project uncertainty impacted the Australian construction industry throughout the most of 2021, which had a depressing effect on demand in most cities. Due to increased competition, building companies and their contractors began to absorb cost increases rather than fully pass them through, the author noted.
Brisbane has experienced the most increases in building expenses, according to an analysis by Arcadis of major cities.
Brisbane is the exception; while it was generally undisturbed by lockdowns, it did experience prolonged border restrictions. According to our data, building expenses in Brisbane increased by 12.1% in 2021,’ Mr. Mackey added.
Sydney only had a 1.5% increase, while Melbourne saw a 2.3% increase. Neither of these cities, however, experienced the same level of hardship as Brisbane as a result of prolonged border restrictions.
“Late in 2021, we observed increasing indications of cost increases being passed through, and we anticipate that this will fuel considerably higher inflation in construction tender price inflation in 2022. Indeed, as pressure from rising materials, commodity, and labor costs bites, that is already happening in many capital city marketplaces.
Steel and wood prices in particular increased significantly as a result of global demand outstripping supply. The cost of PVC, electrical goods, and roofing supplies is also rising.
Lumber prices spiked in March, but as interest rates rose around the world, construction of new homes fell sharply, with lumber prices falling by 52% between April and July.
Only 13% of businesses reported a scarcity of timber in April, down from 61% in April 2021. But because of overstock and material losses, businesses are now being compelled to lower the price of wood.
“The industry as a whole is slow to respond.” Some of that is naiveté, the belief that “she’ll be right” will cause this to be undervalued. The industry is always seen as having a half-full attitude, which is counterproductive, according to the Arcadis Executive Director.
Australia has always existed in a bubble of its own. Although there was a GFC, it was never as bad as in the US and UK. Very slight dip and quick return even with Covid.
The industry operates under the assumption that this will resolve itself at some time, but we don’t really know.
Precast concrete, which has often been processed in factories at a lower cost than standard concrete, is suddenly more expensive than the alternative, another indication of how unpredictable the market has become out of control.
The home market is more heavily reliant on timber, according to big builders. With the New Home Grant, there has been a significant increase in house construction over the past two years, Mr. Mackey told Daily Mail Australia.
We are currently experiencing the aftereffects of that, including labor shortages, material cost rises, and material shortages.
It caused the perfect storm, as they say. Currently, it is seriously harming the industry, and no one knows how it will turn out.
While major corporations handle enormous orders, small and medium-sized enterprises struggle, with job losses as a result of prolonged material waiting times.
With the construction sector typically only making profits between two and four percent, margins are also dramatically declining.
Normally, businesses will pass on their higher costs to the final customer, but according to Mr. Mackey, contractors locked themselves into quotes months before the cost of materials increased, meaning they had to pay the difference out of their own pockets and only turn a pitiful profit, if not a complete loss.
According to Mr. Mackey, “some people are blaming the epidemic, some are citing increases in material costs, but there’s a broader issue, and it’ll hurt just as much the bigger corporations as the smaller businesses.”
“The market is making an effort to counteract the volatility.” The issue of supply availability is less important today, but energy prices are skyrocketing, commodity prices are still rising, and material costs are still rising.
“Contractors, especially tradespeople, will struggle.” They will be forced to pay those costs if they have already signed a contract that forbids material price changes.
The problem is that if costs have increased in the past six months, they will have to bear those charges.
According to Mr. Mackey, the market was being negatively impacted by the rising price of structural steel, which meant that Australian tradies were feeling the effects of inflation.
“The price of steel is directly impacted by the price of iron ore.” According to him, the information is passed on to the supplier of the materials and then to the contractor.
He stated that given the lack of a clear timeline for when the current problems might be handled, he wouldn’t be surprised if more significant and small enterprises fail.
If contracts are in line with risks and clients are willing to accept those risks, the Arcadis director predicted that more contractors will find themselves in desperate situations due to the level of risk there.
“The government needs to take the initiative on it, not just by passing legislation. While financiers are tightening the screw because builders can’t manage risk any longer, they must be present at the table in the same capacity as customers and contractors.
As his business tries to navigate the post-pandemic building scene, Geelong carpenter Donald Conway claims that material costs are the main obstacle to keeping his quotations as low as possible.
The cost of materials during the last four to five months, according to Mr. Conway, has had the most influence.
The price of everything has been going up, from fuel to the Queensland floods that have cut off the supply of some types of lumber.
“A decking project can start to really add cost rapidly,” says the author, “with lumber going up even by say $2 per linear metre.”
The director of Levelline Renovations & Plumbing in Sydney, Justin Tanios, stated that he was doing everything possible to avoid passing on the rising cost of raw materials.
While the majority of people are quite accepting of the expense challenges, Mr. Tanios noted that some people are unable to afford higher costs.
One tactic he had used to cut down on unneeded spending was to only accept jobs within a 15-20 kilometer local radius.
Working locally, according to Mr. Tanios, “helps to keep costs like petrol, tolls, and car maintenance down.”
Mr. Conway claimed that he had used a similar approach for Doncon Carpentry, a company that the 24-year-old started two years ago.
He claimed that at first he resisted the chance to raise prices out of sympathy for people who wanted to construct new homes, but that his own soaring bills soon compelled him to make changes.
‘At first, I tried not to put costs up, as I genuinely felt for anyone who worked hard to save for an exciting new home renovation project, only to have that snatched out from under them due to circumstances beyond their control,’ he said.
‘However, when I started losing money on jobs, I concluded that I needed to raise pricing simply because that is what the work is now worth.
‘To offset this, I’ve been more careful about the tasks that I take on and focused on those closer to home in Geelong.
Personally, I’ve found that being honest has been crucial during this period.
If I’ve had to raise prices, I’ve always tried to treat my consumers fairly and have been open and honest about why.
On Wednesday, the Fire Services Australia (FSA) Group, which provides contracting services for building projects and has been in business for 27 years with $10.6 million in contractor debt, also filed for voluntary administration.
The company, which has offices in NSW, QLD, WA, and the ACT, was hired to work on a number of ongoing projects involving mechanical services, electrical maintenance, and fire safety.
123 employees nationwide have lost their jobs as a result of the most recent collapse, and many of them are in disbelief over the company’s demise.
‘A sad day for all at FSA. According to Curtis Lindsay, project manager for QLD FSA Services, last Wednesday was a day that not many people anticipated.
“Out of all the businesses I’ve worked for, this one felt the most like home.” Everyone, from the office staff to those on the ground, made time for one another.
I appreciate having the chance to work with so many people who share my interests.
Sydney-based firm Taylor’s Insolvency has been appointed as the company’s administrator and is seeking a buyer to take over the group.
Managing Director Josh Taylor said 264 creditors have been identified so far, which include employees, the Australian Taxation Office and other contractors.
He said the company – which owes $10.6million – received 60 per cent of its revenue from its activities in QLD, which were hampered by the floods in March.
‘Generally speaking it was Covid and the floods that hit them really hard because they can’t work when it’s raining and when it’s flooded,’ he told news.com.au.
According to Mr. Taylor, stockholders tried to keep the company viable by looking for methods to cut costs and injecting additional capital, but their efforts were ineffective.
The “profitless boom” has some validity. Although they were gaining a lot of clients, they weren’t making much money from their contracts, and the cost of the deliverables was greater than the revenue.
And we observe that in a number of other businesses. After having a very sleepy last few years, insolvency is finally starting to wake up again; it turned around about four months ago.
Staff employees who were devastated by the announcement hurried to LinkedIn to share the news and recall their time working for the company.
An NSW state manager claimed to have only held the position for 18 months.
“It has come to a very sudden end,” he said, “having taken the chance, moved to another state and done the next step in my career, experiencing a lot, learning alot, and finding a terrific bunch of people to join the team.”
“I never in a million years imagined going through this procedure, but what it shows is what this industry can accomplish for others,” the author says.
The fact that so many people reached out to me with their worries and how quickly job offers were extended to my technicians helped allay a lot of my worries.
An electrician, who worked for the business for 11 months, said it was a ‘sad day’ to see FSA Group ‘shut their doors’.
‘Something I didn’t envisage experiencing in my career is being made redundant,’ he said.
I just want to express my gratitude to all of my coworkers, customers, and shareholders for making my time at the company such a positive one!
The group works in a number of important industries, including government, education, entertainment, health and aged care, defense and justice, and financial institutions, according to the corporate website.
The variety of services offered included safety audits, heating, ventilation, and air conditioning, as well as installation and maintenance of electrical and fire protection systems.
The liquidation follows a turbulent year for the construction sector, which saw a number of high-profile businesses fail in recent months.
Construction behemoth Pro-build filed for bankruptcy in March, leaving 784 employees with over $14 million in unpaid wages, and Gold Coast-based Condev named liquidators a few weeks later, leaving creditors with a $31 million loss.
More recently, the Victorian home builder Waterford Homes filed for bankruptcy last week, leaving at least $600,000 in debt to 60 creditors.
Ten homeowners are still living in unfinished homes as a result of the demise of the Geelong-based company.
Numerous other smaller companies have also filed for bankruptcy, including Hotondo Homes Hobart, Home Innovation Builders, New Sensations Homes, all of which are located in Perth, and Next, a company based in Sydney.
Pivotal Homes and Solido Builders both closed their doors at the end of May, indicating that the trend had also spread to Queensland.
As economic problems wreck havoc on the sector, several other businesses have spent the past few months teetering on the verge of failure.
Melbourne-based construction giant Metricon – one of the nation’s largest companies – last month sparked rumours it was trouble after holding crisis talks with clients and meeting with the Victoria Treasurer.
The owners injected $30million into the embattled company, although bosses have denied it is at risk of entering liquidation.
In Victoria, Snowdon Development PTY Ltd could be facing insolvency after racking up $2.5million worth of debt with 15 creditors as the firm’s projects stall for months.
Creditors are now calling on the Supreme Court of Victoria to take action by forcing the company to go into liquidation.