Another major building firm goes bust leaving families with properties under development in limbo – as Australia’s construction sector reaches crisis point
- NSW-based builder Elderton Homes is the latest construction firm to collapse
- The boutique builder announced on Monday it is being placed in administration
- Dozens of building companies across Australia have folded in the last year
Another major builder has joined the growing list of construction companies that have collapsed amid soaring material costs, labour shortages and disruptions.
Elderton Homes, based in NSW, announced on Monday it had appointed administrators to manage its operations going forward.
The boutique builder said the ‘difficult decision was the result of a number of factors’ citing the bushfires and floods, Covid pandemic and economic downturn.
‘The construction industry has been subject to record levels of rainfall, substantial price increases on building materials, supply chain challenges and labour shortages,’ Elderton’s management said in a statement.
Elderton Homes on Monday announced it was being placed into administration
‘Elderton Homes is proud to have built thousands of homes for customers around Greater Sydney, Central Coast, and Illawarra and have assisted our clients build their first home, investment properties, and dream homes.
‘We want to thank our amazing internal team members, suppliers and subcontractors who have helped us on our journey over the past 13 years.’
The company is the latest in a long list of construction firms which have folded in the last 12 months including big players like ProBuild and Condev Constructions along with smaller firms such as Hotondo Homes Hobart, New Sensation Homes and Pindan Group.
Just last week Queensland-based builder Lanskey Constructions went into liquidation, following fellow Sunshine State firms Oracle Platinum Homes and Besse Construction in August.
The collapses across the industry have left hundreds of staff without jobs, thousands of homes incomplete, and customers and subcontractors owed tens of millions of dollars.
Customers who have contracted the company to build their house will now have to wait and see if administrators can return their money
The industry’s problems stem from supply chain issues for building materials combined with low stock from national and international sources.
This led to a spike in demand for remaining stock and price rises, with builders bearing the brunt.
Costs of metal ores, plastics, and timber have been consistently rising for years, but particularly through Covid lockdowns as factories were forced to shut down for extended periods.
Buildings sites also had to close for weeks or months and this, combined with weather events like bushfires or floods, and have blown out project schedules and pipelines.
Trades have also jumped in cost thanks to labour shortages and less competition, with a recent Housing Industry Association report finding costs for bricklayers rose by 16.4 per cent, carpenters by 12.5 per cent and painters by 12.2 per cent since 2020.
Prices of materials have been rising steadily since the start of the pandemic, but exploded in April and May last year (average prices of commodities – Arcardis statistics)
This perfect storm for constructions firms, which often tender for jobs on thin profit margins, has left many scrambling.
While customers can access safety nets such as the Home Building Compensation Fund in NSW or the Queensland Home Warranty Scheme, many are calling on the government to step in before it gets to that.
The Australian Constructors Association (ACA), representing industry giants like Built, Icon, and Multiplex, want the government to agree to a mechanism to compensate for increased costs.
‘Some projects are often entered into years before they are completed,’ CEO Jon Davies said.
A ‘rise and fall’ contract clause would allow for price adjustments with the market halt the ‘growing trend of insolvencies,’ he said.