Qattro collapse puts industry on edge amid fears of more failures
The collapse of a third SA home builder in as many months has rocked the construction industry – sparking fears of more pain to come.
The collapse of a third South Australian home builder in as many months has rocked the local construction industry and sparked fears of more pain to come in the wake of surging labour and material costs and a downturn in demand for new housing.
While rumours of Qattro’s demise had been swirling in construction circles in recent months, its collapse on Tuesday still came as a shock to many in the industry given its involvement in a long list of major housing developments across 15 years of business.
Following the recent failures of home builders Felmeri Group and 7 Star Constructions, Qattro’s collapse has left builders, suppliers and customers on edge, and questioning whether South Australia will follow the trend in Victoria, NSW and Queensland, where a spate of builders, locked into fixed-price contracts, have hit the wall amid the surge in costs.
Salisbury South company Hi-Tech Roofing Services was Qattro’s primary roofing contractor for more than a decade, supplying to major projects including Fletcher’s Slip and Dock One at Port Adelaide.
Owner Greg Overton said his company had been stung by two previous building company failures, but Qattro had been the largest, owing close to $160,000.
“That hurts – for the first two months of this year we basically worked for nothing,” he said.
“This will impact our business for sure; for probably three to six months.”
Mr Overton said the recent surge in labour and material costs had created the most challenging conditions for builders and suppliers in his 30 years in the industry.
“I’ve never seen anything like what it is now,” he said.
“It’s a couple of years now; building materials in general have gone through the roof. We’ve been subjected to multiple price increases that most of the time we can recoup via our pricing to our builder, but there’s a lot of incidentals and stuff like that. Sometimes you just have to suck it up so that hurts your bottom line.
“It’s starting to come off the boil as far as supply problems, but on the pricing side we’re predominantly Colorbond steel and Colorbond’s gone up again another 5.5 per cent.”
According to figures from the Australian Securities and Investments Commission, the number of construction-related insolvencies across Australia jumped 72 per cent in 2022-23 to 2211.
In South Australia there were just 60 building insolvencies, but Mr Overton fears more companies will fail to survive the current headwinds.
“We think there’s going to be two, three or four that will probably keel over in the next three to six months,” he said.
“I think the strong will survive and you probably weed out the weak a little bit, which is what tends to happen. We don’t want to see anybody go under. It’s your livelihood, your business your staff, your employees. It’s a bloody nightmare.”
The federal government’s HomeBuilder grant, introduced at the height of the pandemic, has been widely blamed for the dire conditions facing home builders across the country.
A surge in demand for new housing and renovations created shortages of labour and materials, sending costs higher for builders locked into fixed-price contracts.
And now, with the stimulus generated by HomeBuilder rapidly fading and higher interest rates softening demand, there are fears builders will be left scrambling for work next year.
According to Housing Industry Association figures, sales of new homes slumped by 26 per cent in the three months to July, while construction is expected to start on just 7546 new houses in 2023-24, 21 per cent lower than the previous year and down from a high of 11,254 in 2021-22.
HIA SA executive director Stephen Knight said the gloomy forecast would leave many builders short of work after the “profitless boom” of recent years.
“HIA’s forecast is that 2024 will be the lowest number of starts for a decade,” he said.
“There’s been a pull forward effect with the HomeBuilder grant, but also high interest rates, cost of living pressures, cost of construction has gone up so much that it’s discouraging people from signing a contract to build. Builders will be looking for work for next year.
“But looking ahead the housing shortage is front and centre – we just don’t have enough homes and both state and federal governments are aware of that.
“They plan to build 1.2 million houses over the next five years – we will have plenty of work in the pipeline but I think maybe next year is just going to be a bit of a lull before that kicks off again.”
Mike Pearl, who runs building inspection company House Inspect Australia, is less optimistic, and believes more failures will emerge in the coming months as confidence in the industry wavers.
He said another side effect of the pressures facing builders was a marked deterioration in the quality of work on-site.
“A major portion of our work now is doing inspections during stages of a build, and that’s purely from word of mouth around Adelaide, where people are saying if you’re building a house it needs to have an inspector out there to inspect it because these are all the things that our inspectors are finding wrong,” he said.
“Five years ago we weren’t finding those mistakes or those issues – but now people are pushing jobs through, getting them done as quickly as they can and yes, there probably is some shortcuts being taken.”
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