Construction Failures

The number of Australian construction companies hitting the wall continues to soar, with almost 1,400 businesses collapsing in the second half of 2023. According to the Housing Industry Association, the construction market is facing one of the worst storms since the energy crisis in the mid-1970s. Factors including high demand, labour shortages, and material supply constraints due to the pandemic effect have resulted in higher construction costs and longer build times. Contributing to the downfall of so many builders are factors such as the global pandemic, pressure of the Home Builder Program, inflation, and fixed price contract price movements. Between July 2022 and April 2023, 1,709 construction companies across the country entered administration, according to data from the Australian Security and Investments Commission.

According to Adam Copp, Chief Executive at Infrastructure Australia, Australia's infrastructure workforce will need to grow by 127% to meet demand.

“The infrastructure sector is delivering a major public infrastructure pipeline valued at $230Bn over five years. This is occurring alongside a plan to build 1.2 million new homes as well as major investment in the energy sector, which is quadrupling over that same period.

“With so much construction activity underway, the industry is finding it increasingly difficult to source key building materials and workers – particularly engineers, skilled trades and labourers.

“Global supply chain pressures have eased for now, with steady improvements in international production, trade, and transport measures compared with 12 months ago,” Mr. Copp said.

“However, Australia’s lack of domestic capacity to supply building materials exposes investments to cost-overruns, delays and future global supply chain risks. It’s also much more difficult to understand the level of embodied carbon in imported materials.

“Australia has an opportunity to build domestic capacity and markets for new low emissions construction materials, such as recycled materials. For major road projects, our modelling suggests that close to a third of conventional materials – 54 million tonnes annually – could be replaced with recycled materials,” Mr Copp said.

According to research conducted by Equifax, only 30% of Australians have a positive perception of the construction industry. Despite 45% of Australians planning to invest in property over the next five years, 47% view the lack of trust in the industry and the shortage of qualified contractors as major obstacles. Stress is a significant issue, with 63% of Australians experiencing it due to living in homes with defects, rising to 77% for those affected. To mitigate this, 63% of Australians are willing to pay more for assurance of working with trustworthy developers, a figure that increases to 76% for those with property plans. Additionally, 56% believe there is a shortage of available homes, with 29% strongly agreeing. Concerns about low supply affecting building quality are shared by 64% of the population, and 32% of those planning property investments in the next five years hold a negative view of the construction industry.

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Source - ABN, Equifax, Infrastructure Australia and Housing Industry Association