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The big, bad wolf is blowing Australian housing again?

  • Metricon, Australia’s largest home builder, is rumoured to be on the brink of collapse.
  • Both Probuild and Condev went under earlier in 2022.
  • Rising materials costs, supply chain constraints, low margins and pandemic-related restrictions have created the perfect storm for the construction industry.

The fragility of Australia’s building sector could hit home again as yet another big name reportedly teeters on the brink of collapse.

This week, reports circulated that Australia’s biggest home builder Metricon is on the brink of collapse, adding the possibility of another construction powerhouse to the growing list of insolvent builders.

The company has responded to rumours saying ‘it’s business as usual’ despite meeting with Victorian Government representatives on Thursday morning.

Prime Minister Scott Morrison also weighed in saying the federal government is engaging with Metricon amid reports of its collapse to help ‘work through the issues’.

If the rumours prove true, Metricon’s estimated 2500 staff and around 4000 homes under construction could face an uncertain future.

Probuild, previously one of Australia’s largest construction companies, collapsed in February 2022, leaving 15 active projects across Australia incomplete including the $1bn Ribbon development in Sydney’s Darling Harbour which is to feature a W Hotel.

The construction giant left 800 workers in the lurch, with more than $14m owed to staff and contractors.

Probuild’s parent company WBHO said the collapse of Probuild followed pandemic related restrictions and lockdowns, low margins, cost blowouts and supply chain constraints.

Just a month later, liquidators were called in to take over Condev, with the company also citing rising construction costs, supply chain issues and the Queensland floods for adding pressure to already slim margins.

According to the AFR, the price of timber rose by 50% to 100% in 2021, the price of steel increased 30% to 60%, and the price of concrete jumped 20% to 40%.

CoreLogic’s latest quarterly measure of residential construction costs showed an increase of 3.8% in the three months to September 2021, the largest quarterly increase since 2000.

The rising cost of building materials, exacerbated by natural events like flooding and geopolitical tensions, in addition to supply chain constraints and soaring subcontractor fees, has proved the perfect storm for the construction industry.

Government stimulus designed to boost the flagging housing sector have also triggered unwanted inflationary pressures.

A splurge on domestic renovations combined with travel restrictions added more heat to an already red hot market.

In March though, Australia’s building approvals fell 18.5% on a seasonally adjusted basis and the value of new residential builds fell 20.7%.

If Metricon collapses, the Victorian Government may be forced to step in to ensure the country’s largest home builder doesn’t leave thousands of Aussies jobless and homes incomplete.

As to what the future holds for the building industry; customers may need to prepare for further price shocks to ensure the wolf is kept from blowing the whole house down.

The one-line takeaway: The domino effect of builder collapses continues amid rising construction costs, supply chain shortages, and soaring subcontractor fees.

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