State’s plan to offer collapsed builders a lifeline as construction crisis grows

As the construction crisis continues to worsen, one Australian state is weighing up an ambitious plan to keep collapsing firms afloat.

As Australia’s construction industry nightmare worsens, one Australian state is considering rolling out a plan to support struggling businesses.

According to the Herald Sun, Victoria is considering some form of support which would help Metricon and other firms survive after a series of cost blowouts threatened to end them.

Treasurer Tim Pallas told the publication supporting the industry was top priority and that he was “concerned” by the state of the sector, but he declined to comment on what form the support would take.

“As you would appreciate with fixed price contracts, we’re seeing a bit of pressure in that market,” he told the Herald Sun.

“The government’s looking at what it can do to assist.

“Principally our focus at the moment is the situation that Metricon is facing.”

For weeks now, speculation has been mounting that building giant Metricon was on the brink of collapse, with company representatives meeting with the Victorian government late last month for crisis talks about the escalating issues plaguing the sector, including the surging costs of essential materials such as timber and steel.

Rumours of Metricon’s potential collapse have been swirling for weeks. Picture: Kiel Egging

The industry-wide problems have already seen Gold Coast-based Condev and industry giant Probuild enter into liquidation in recent months, while smaller operators like Hotondo Homes Hobart and Perth firms Home Innovation Builders and New Sensation Homes, as well as Sydney-based firm Next have also failed, leaving homeowners out of pocket and with unfinished houses.

Just last week, Metricon injected $30 million into its business to allay fears about its survival.

Speaking to Today this morning, the Master Builders Association’s Brian Seidler said the sector had been hit by a “perfect storm” of problems including increased demand after the pandemic, the skyrocketing cost of materials and employee shortages which were driving up prices for customers – and that is was all due to the fact many countries had relied on the industry for post-Covid economic recovery.

“Unfortunately, everyone’s building, and that has an impact, not only on materials but also on labour costs,” Mr Seidler said.

He added that he believed soaring prices would start to plateau in the months ahead, although it would still be quite a while before prices dropped.

Master Builders Association’s Brian Seidler said costs would slowly start to plateau.

“We’ve had some major spikes in the last six months, up to 40 per cent in steel and 35 per cent in timber, and they’ve had enormous impacts on the cost of doing building, particularly in the residential sector,” he said, adding that timelines were also blowing out as a result of the combination of pressures.

Mr Seidler also said builders who went through a tender period during Covid were now doing it tough.

“We’ve had massive increases and we’ve got builders who are saying, well, we can’t simply build for the prices that we did 20 months ago,” he said.

Experts have agreed that the construction industry’s horror run means it is at risk of more insolvencies.

Russ Stephens, co-founder of the Association of Professional Builders, has estimated around 50 per cent of Australian building companies are currently trading insolvent – which means they can’t pay their bills.

It comes as the Australian Bureau of Statistics showed dwelling approvals were well down from April 2021 levels with a 32.4 per cent decline.

From March to April new dwelling approvals also fell by 2.4 per cent to 14,908 – outstripping economists expectation of just a one per cent dip.

JP Morgan economist Jack Stinson predicted building approvals will continue to plummet as interest rates rises and house prices fall.

Originally published as State’s plan to offer collapsed builders a lifeline as construction crisis grows