Peak demand for construction businesses a strain on industry

It’s been a record year for housing in Tasmania, but a perfect storm has put pressure on construction businesses – causing two Tassie builders to fold.

It’s been a record year for housing starts in Tasmania, but eye-watering material prices have put pressure on construction businesses as two big names fold.

The Hotondo Homes New Town franchise has gone into liquidation, with tens of customers and contractors left out of pocket, just months after local business Inside Out Construction folded in November.

Despite a housing boom keeping tradies busy, Master Builders CEO Matt Pollock said the industry had seen “more businesses fail than perhaps we would in a normal year”.

Coronavirus had caused supply constraints for building materials, driving prices up.

“Prices may have moved significantly from the time that the contract was originally entered into,” Mr Pollock said.

Matthew Pollock. Picture: Richard Jupe.

“That can be a bit of a toxic mix for builders.”

Mr Pollock said Master Builders was working with members to help find builders to take on abandoned jobs brought on by sudden closures, and encouraged struggling homeowners to get in touch.

“It’s encouraging that at the end of last year the government did come out and confirm they’d be looking into strengthening some of those consumer protections,” he said.

Dobson Mitchell Allport lawyer Chris Groves, who primarily handles construction and insolvency law, said it was odd for two construction businesses to “hit the wall” within quick succession.

Half completed Hotondo Home in Kingston after Hotondo goes into receivership. Photo: Linda Higginson.

“I’ve certainly had … a bit of an uptick over the last few months in terms of people needing assistance because their builder has gone into insolvency,” he said.

Mr Groves said liquidators would distribute funds first to priority creditors, like employees, then to “ordinary unsecured creditors” like customers and contractors.

“There’s often actually very limited things that a lawyer can do because a lawyer can’t get them to jump the queue,” he said.

Labor Leader Rebecca White said the government needed to reintroduce the Home Warranty Scheme urgently.

Labor leader Rebecca White. Picture: Nikki Davis-Jones

“One of the biggest commitments any person can make is to purchase a home,” she said.

“It’s a lot of money, it’s a lot of emotional input, and to discover that the contractor you’d engaged has gone under and you might not be able to ever complete that home is utterly devastating.”

She said Labor had pushed for an industry-wide inquiry amid concerns the sector could see more strife.

Premier Peter Gutwein encouraged people affected to seek legal advice.

“We’re taking advice and attempting to understand the depth and breadth of the number of home builders that have been impacted and then we’ll have more to say,” he said.

“In terms of the home warranty insurance obviously that will need to be legislated but look, I’ll take advice on that in terms of whether or not there does need to be any retrospectivity.

“To date, I don’t have that advice.”

Hotondo Homes Australia was in favour of bringing back the scheme.

“This protection for consumers is currently in place in every other state and territory in Australia and Hotondo Homes fully supports reintroducing this measure in Tasmania,” the company said.