SA builders weather industry crisis but crunch time looms as HomeBuilder stimulus ends

SA builders have so far survived the worst of the labour and materials shortages, but a huge stimulus package is about to end.

The state’s construction industry is weathering the storm that has caused a string of company failures in the eastern states, but there are fears work could dry up once the final stages of the HomeBuilder stimulus come to an end.

At least 15 large building companies have collapsed across the country over the past year, as builders, locked into fixed-price contracts, face a surge in costs caused by severe shortages of materials and labour.

However construction insolvencies in South Australia have been limited to a handful of smaller firms, while the big players have taken a hit but survived.

The latest ASIC figures reveal just one of the 21 corporate insolvencies in August was a building company – Tokic Constructions – while the hospitality industry continues to face its own challenges, with La Rambla tapas bar the latest to fall victim to the lingering impact of Covid.

The total number of insolvencies was up from 19 in July and 20 in June, a consistent monthly trend that remains about 30 per cent lower than pre-Covid figures.

Nationally, the rate of business collapses is currently tracking at about 8.5 per cent below pre-Covid levels.

Ian Burford of Macks Advisory said the rise in interstate insolvencies was due to the ATO ramping up its debt collection activities in the eastern states, and the tax office would soon target South Australian firms, putting several industries at risk.

“I think the tax office is pursuing the easier and larger debts, which are generally in the eastern states, so it hasn’t really flowed here yet, but obviously it will sometime soon,” he said.

“We see hospitality, we do see the building industry struggling, anecdotally, from staff shortages, material shortages, price rises, and a lot of builders with fixed-price contracts – it’s got to hit home at some point.

“And we also think that we haven’t seen the end of transport challenges, particularly when the excise goes up at the end of next month – we see a bit more hurt to come there yet.”

Queensland’s Oracle Building was the latest in a string of large interstate builders to collapse, when it fell into liquidation last week after racking up debts of $14m and leaving 300 unfinished houses.

Housing Industry Association SA executive director Stephen Knight said while larger South Australian builders had survived the worst of the labour and materials shortages, crunch time would come next year when the last HomeBuilder projects are completed.

To be eligible for the HomeBuilder grant, applicants had until March 2021 to sign a contract, and then a further 18 months to start construction on-site.

That means the final deadline for construction commencement is looming later this month.

“We still have a large amount of work to get through between now and mid-next year – I guess the issue for us is what will happen after that,” Mr Knight said.

“Certainly traffic through display homes and sales inquiries have definitely fallen since interest rates have risen and so we really need to get buyers back into the market around the end of this year so that we’ve got work ready to start in the middle of next year.”

Mr Knight said higher energy prices were also likely to put pressure on the cost of energy-intensive materials such as bricks, cement, aluminium and glass.