Roof caving in despite home giant Metricon’s reprieve

With 100,000 houses under construction, builders say spiralling costs and a worker shortage have caught the industry in a ‘cost and cashflow crunch’.

Metricon chief executive Peter Langfelder.

Builders have warned spiralling costs and a shortage of workers have caught the industry in a “cost and cashflow crunch’’ as embattled construction giant Metricon reached an indicative financial rescue deal with its bankers on Friday.

Under the Metricon deal, the Commonwealth Bank will double the company’s working capital and its owners will inject $30m of their own funds into the business, following the collapse of two Queensland builders in as many days.

“This significant injection of capital by the owners demonstrates to our customers, employees, subcontractors and suppliers our confidence in the viability, profitability and future of the Metricon business,” Metricon chief executive Peter Langfelder said. “We are so appreciative of the bank’s support, which demonstrates its confidence in our ­future.”

Despite a national building boom that has driven a record 100,000 houses under construction, many builders are finding that spiralling costs are eroding their operating margins just as a lack of staff cause them to fall ­behind on projects.

Master Builders Australia chief executive Denita Wawn said “builders are caught in a cost and cashflow crunch due to the combined impact of cost ­increases, delays in availability of building materials and labour, and bottlenecks in building ­approval processes in some ­regions”.

“Giving opportunities to Australians must come first, but we have now reached 3.9 per cent ­unemployment and our industry needs skilled migration to be reinvigorated so that we can meet ­demand and build people’s homes,” Ms Wawn said.

Brisbane luxury-home spec­ialist Solido Builders became the latest builder to collapse on Friday, a day after Surfers Paradise-based builder Pivotal Homes went into voluntary administration after it realised it could not remain solvent and complete its pipeline of fixed-price contracts.

Condev Construction, a large southeast Queensland builder, appointed liquidators in mid-March, after it said it had been hit by a 25 per cent surge in costs over the previous 18 months.

South African-owned construction giant Probuild collapsed in February.

Deputy Prime Minister Richard Marles said “we understand the issues that the building industry is facing, both in terms of finding materials but also in terms of finding the people with the skills that they need”.

 

Mr Marles said the Albanese government had “a range of policies, particularly in respect of skills, about making sure that we address the issues that the economy faces”.

“This is difficult. And it’s not going to happen overnight, but we are absolutely committed to starting that job right now,” the deputy Labor leader said.

Australian Bureau of Statistics figures show the number of stand-alone house builds under way has jumped from a more typical 60,000 before the pandemic to 100,000 at the end of 2021 – a number which experts said would now be even higher.

The value of this work since the onset of the pandemic has doubled to an unprecedented $20.6bn as at December, the ABS data shows.

BIS Oxford Economics head of building forecasting Timothy Hibbert said: “The inflation of wages and materials happens through cycles, but nowhere near to this magnitude – this has been vicious, and it has caught people off guard. You need to go back to the 1970s and 80s to find a comparable period, but even those were still not as extreme.”

With runaway cost rises crunching margins, Mr Hibbert said “we definitely will see players struggling, and higher rates of builders going bust”.

“The ones more likely to be getting into more trouble will be the smaller and medium-sized players, (but) there seems a reasonable probability we will see some major insolvencies too.”

Australian Constructors ­Association CEO John Davies said the issues facing the civil and engineering construction firms were of the same magnitude.

Mr Davis said he had never seen the same sorts of pressures “anywhere, anytime”.