NSW sees highest monthly construction insolvencies on record in July, ASIC data shows

Building company failures have surged 101 per cent from this time last year to see the highest monthly toll since records began. See the list of company names.

Insolvencies in New South Wales’s construction sector have more than doubled from a year ago with many more builders tipped to fold in the months ahead.

The construction industry in NSW recorded 177 corporate failures in the past month — a 101 per cent jump from 88 in July 2022, according to the latest ASIC insolvency statistics.

It is the highest number in a single month in the 10 years since ASIC started reporting industry-specific insolvency data.

Apartment giant Crown Grouphas been the biggest building group to go insolvent since the start of the financial year after the liquidators were appointed to the apartment behemoth and 40 of its entities.

Allura Homes, ABH Building Group and Studio Constructions were among the other home building groups to be liquidated in July.

In total 396 NSW companies failed in July, up from 343 the year before.

It comes as nationally 820 companies fell into administration, liquidation or receivership in the past month, up from 715 in July 2022 and from 425 in 2021, according to ASIC data.

The result was worst start to a financial year since 2019.

Australian Restructuring Insolvency and Turnaround Association (ARITA) chief executive John Winter said there many more construction firms were in trouble and more were likely to go out of business in the months ahead.

“Construction has been very competitive for the past few years and those fixed price contracts have not been viable as a result of inflation and supply chain woes, which have seen many bleed large amounts of money,” he said.

“Customers getting a house built and creditors such as sub contractors in that space need to be cautious with who they deal with and how much of a bill they can rack up on your behalf.”

NSW accounted for more than 60 per cent of the construction failures across Australia in July with Victoria notching up 48 construction failures and 35 in Queensland.

Rollercoaster ride

Housing Industry Association chief economist Tim Reardon said the sector had been on a rollercoaster ride in recent years with wash up still being felt, adding that there were a new set of challenges operators facing the industry.

“Mid-tier builders have generally been the most challenged in the current environment after coming unstuck by looking to aggressively increase their pipeline of projects during the pandemic.”

Mr Reardon said the construction sector was in a different spot to a year ago with the volume of sales at their lowest in a decade and materials price growth at more manageable levels.

“Now that there are fewer contracts going around builders are facing very different challenges now with the need to look for more customers to keep going,” he said.

Insolvencies dropped during the height of Covid-19 when temporary measures were put in place by the Morrison government to protect vulnerable businesses from the economic shock of multiple lockdowns.

NSW apartment developer Crown Group, led by Iwan Sunito, has been the highest-profile firm to collapse this financial year.

Retail woes

Accommodation and food services made up the second highest volume of insolvencies followed by retail as Australian households continued to tighten their belts amid the cost of living crisis.

Several popular food businesses became insolvent in July including Valentino’s Woodside Pizzeria and Restaurant in Sydney’s west, Coffee & Crackles in Smithfield and Kombucha Zest in West Gosford.

Mr Winter said that many businesses were yet to feel the full impact of 400 basis points worth of interest rate hikes by the RBA in the past year. He added that despite a pick up in insolvencies, levels were now around those seen before the pandemic.

“Zombie businesses have been allowed to run riot for three to four years now and the clear out of those inefficient businesses is a good thing.” Right now we are moving to more healthier levels.

“We know that there is a 12-18 month lag before businesses really start to feel the pinch and while more businesses will go under but there won’t be a tsunami of collapses.”