ABD Group falls to construction squeeze owing up to $80m

The profitless construction boom has claimed a Melbourne-based firm.

One of Queensland’s largest residential builders, Privium Group, collapsed this month and conditions are not expected to improve in the sector until 2023.

The mounting pressure on construction group ABD Group has culminated in it calling in administrators SV Partners amid concerns the firm could owe creditors up to $80m.

The firm, which has builder Raffaele Aiello as its remaining director, had lost key jobs as developers replaced it with larger contractors and it did not begin some jobs that had been lined up.

The Melbourne high-rise builder called in SV Partners’ Michael Carrafa and Peter Gountzos as liquidators in a creditors’ voluntary winding up. Secured creditors include National Australia Bank and crane hire companies but subcontractors could be left out of pocket.

The collapse of the business – which changed name to A.C.N. 109 588 589 Pty Ltd – signals the pressure that builders are under after lockdowns in Melbourne and rising supply chain problems.

One of Queensland’s largest residential builders, Privium Group, collapsed this month and conditions are not expected to improve in the sector until 2023.

The boom in residential building activity has resulted in a leap in the price of materials and builders that have been caught have lost out, prompting warnings of a profitless property boom.

ABD Group stopped work on three major projects including the Bensons Property Group project, Liberty One, in the Melbourne suburb of Footscray. But works there are well advanced and the 378-unit project will be completed by rival builder Hickory Group.

Work that ABD Group was undertaking as part of a $140m contract on the Suleman Group’s 330-apartment Union Quarter build-to-rent project in Spotswood has stopped. Plans for it to build Kokoda Property Group’s $250m Malvern Collective project were scrapped last month.

ABD Group’s development unit, Marcus Group, is thought to have stopped work on projects it has across Melbourne.

The surge in new builds and renovations coupled with supply chain disruptions and a shortage of materials has resulted in a national spike in construction costs.

CoreLogic’s quarterly measure of residential construction costs revealed a national increase of 3.8 per cent in the September quarter, outpacing the consumer price index of 0.8 per cent for the period. The Cordell Construction Cost Index showed the largest quarterly increase since the third quarter of 2000, when construction costs increased 7.2 per cent after the introduction of the GST.

CoreLogic research director Tim Lawless said the surge in dwelling approvals, which peaked in March, was now progressing through to construction, causing widespread demand for materials and trades.