‘Inevitable’: Sign Australian house prices could plummet even more as rate hike hits developers

An industry expert has predicted more construction firms will collapse – and it spells even more bad news for Aussie homeowners.

There are growing signs Australia’s real estate industry is in for yet another blow, with major companies heading for disaster.

For months now, experts have been sounding the alarm over falling house prices, with this month’s historic interest rate rise – the first in 11 years – sparking renewed fears of a plunge in real estate values.

In fact, this week, HSBC chief economist for Australia and NZ Paul Bloxham forecast that rates would rise to 1.35 per cent by end 2022 and to 1.85 per cent by the second quarter of 2023, which is set to drive housing price falls by as early as mid this year.

Interest rate hikes and a struggling construction sector will likely affect house prices even further. Picture: iStock

“The pace of housing price growth has slowed recently though, such that housing prices are up by only 1 per cent since the beginning of 2022, after a gain of 21 per cent,” he said.

“The Sydney and Melbourne housing markets have stalled since the beginning of the year.”

The huge influence of interest rate rises means HSBC has revised its 2023 housing price forecast from 1 to 4 per cent growth to an incredible 5 to 10 per cent fall.

But that pain is set to be exacerbated as more construction firms collapse, with an industry insider predicting it was “inevitable” that more companies would fold within months.

Speaking to 9 News, Andrew Spring, partner at Jirsch Sutherland, said a series of interest rate rises would put further pressure on the sector, which was already feeling the pinch as a result of supply chain issues, Covid lockdowns, soaring costs and labour shortages.

Probuild collapsed in February. Picture: NCA NewsWire/Andrew Henshaw

“The concern that interest rate rises bring is that it softens the property boom, or eradicates it to a point where the purchaser is worried that the value of their property is not continuing to rise, and in fact may well decline,” he said.

“It’s inevitable there’s going to be a lot more insolvency in the construction industry.”

Construction industry collapses then have a flow-on effect, in turn impacting tradies, builders and subcontractors.

The dire warning comes hot on the heels of a number of recent collapses that sent shockwaves across the country.

In January this year, about 40 families were left in limbo and tens of thousands of dollars out of pocket after Hotondo Homes collapsed with liabilities of more than $1 million.

A month later, building giant Probuild was placed into voluntary administration, leaving 750 jobs in the lurch.

It was followed by Condev just a month later. Picture: Nigel Hallett

It was quickly followed by Condev the following month, with the firm entering liquidation after failing to secure a reported bid for $25 million from developers.

Since then, a number of other high profile companies have also collapsed, including Privium Group, Inside Out Construction, Dyldam Developments, BA Murphy and Tasmanian Constructions.

Earlier this week, a building insider told news.com.au he believed the industry is only “going to get worse” after a string of collapses in the sector, as the price of building homes blows out between $40,000 and $100,000.

The source, who spoke to news.com.au on the condition of anonymity, said “outrageous” price gouging from suppliers has helped send the average price of a house in NSW up from $330,000 to $440,000 in the last 12 months.

– with Sarah Sharples