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What keeps nailing Australia’s construction sector?

  • Probuild in administration despite being one of Australia’s largest construction companies with annual turnover of more than $2 billion.
  • The collapse is a possible indicator of the wider demise in the residential construction sector reminiscent of the East Coast in 2012.
  • Yet the ABS forecasts that the construction industry will grow by 3.4% between 2022 and 2025.

The collapse of construction giant Probuild has cast a cloud over Australia’s wider residential construction sector reminiscent of the wave of dark days faced by the East Coast a decade ago.

Today (February 25), administrator Deloitte began its search for a new owner to recapitalise Probuild as it looks to restart, if at all possible, the collapsed building giant’s 18 projects worth billions in completed value.

According to the company’s website, Probuild has annual turnover of more than $2 billion and work in hand at around $5 billion. It develops large residential and retail projects, with thousands of apartments under construction and more than 370,000m2 of retail work underway.

Its demise highlights an unfortunate reality of Australia’s oft-times booming construction industry. No other single industry in the country is blighted by the scourge of insolvencies close to the same extent as building and construction.

In 2013-14 alone, Australian Securities and Investments Commission (ASIC) figures show that insolvent businesses in the construction industry had a total shortfall of liabilities over assets accessible by their creditors of $1.625 billion.

Just in the month of August 2021, there were 82 building and construction insolvencies recorded across Australia – a 61% increase from August 2020 when 51 such insolvencies occurred, according to Master Builders Victoria.

A decade ago the sector had some dark days. In 2012, there was a wave of construction company insolvencies in the capitals of Sydney, Melbourne, and Brisbane. In March that year alone, more than 80 building and construction firms entered into administration, liquidation, or were given a winding up notice. More followed suit in the months that followed.

During this dark period, one of the larger collapses was construction services company Hastie Group, which was forced into administration owing about $500 million.

Right now, the sector is plagued by soaring costs and project delays, all exacerbated by the pandemic. However, despite this, the Australian Bureau of Statistics (ABS) expects the Aussie construction industry to register a real average annual growth of 3.4% between 2022 and 2025, supported by construction works on the considerable pipelines of public infrastructure projects. As part of its fiscal year budget (to June 2022) released in May 2021, the Australian Government announced an additional investment of $15.2 billion on infrastructure works over the next 10 years.

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