WA Housing Group and Individual Developments WA collapse amid soaring building material costs
Two more major building firms – WA Housing Group and Individual Developments WA – have collapsed amid soaring building material costs and labor shortages.
The deepening industry crisis is leaving some would-be Australian homeowners in the lurch with half finished projects.
WA Housing Group, which started in 2019 and reportedly owes around $1million to creditors, with 13 unfinished projects, went into liquidation on December 7.
IDWA had been contracted by the Western Australia Government to build a $2.4million social housing development – projects that was almost finished but still needed some work.
WA Housing Group, which started in 2019 and reportedly owes around $1million to creditors, with 13 unfinished projects, went into liquidation on December 7. Pictured is an unfinished building project
It attempted to renegotiate a contract with the Department of Housing and Communities, but an agreement on a new price could not be reached.
Mathieu Tribut of liquidator GTS Advisory, told The West Australian that both companies founded as construction costs went up on their fixed-term contracts.
‘The reason (WA Housing Group) ceased trading is because they were, in my view, trading whilst insolvent and they were incurring losses every month so they had no choice but to close down the door,’ Mr Tribut said.
‘They took a bank loan, everyone lost, even themselves.’
A state government spokesman said the DHC would work with the state-wide Builders Panel to reassign and finish the properties IDWA was working on.
Many construction companies have collapsed during the Covid-19 pandemic. Pictured is a stock image of a female engineer on a building site.
‘Prior to being advised of the appointment of liquidators, the Department has been in regular communication with IDWA regarding progressing their active projects and the documentation required to substantiate their claim under the builder support package,’ the spokesperson said.
‘The state government works to support the industry and works closely with contracted residential builders in the current construction market while ensuring sensible and appropriate expenditure of taxpayer funds.’
THE FIVE FACTORS MAKING LIFE HARD FOR TRADIES
Rising material costs
2 – Choked supply chains
3 – Fuel and vehicle price hikes
4 – Difficulty finding staff
5 – High wages
The WA companies are the latest to have folded during the pandemic with many struggling to find staff and facing problems sourcing and paying for materials due to a worldwide shortage.
Choked supply chains due to the pandemic and the war in the Ukraine, along with increasing fuel prices and high wages, have also contributed to problems in the industry.
The cost of materials has risen by more than 20 percent since the start of 2022, making many fixed contract building projects no longer viable.
The Reserve Bank of Australia (RBA) said this meant ‘profit margins for existing fixed-price contracts have compressed substantially, and builders are now making losses on some contracts’.
The RBA has warned there are likely to be more construction company collapses as builders struggle with rising costs.
Some of the biggest names in Australian construction have become insolvent over the past year including Probuild, Home Innovation Builders, Privium, Condev Construction and Pivotal Homes.
‘Overall, construction company insolvencies have increased sharply, exceeding their pre-pandemic levels and accounting for close to 30 per cent of all company insolvencies,’ the RBA said in its twice-yearly financial stability review.
‘More recently, the increase in interest rates has begun to raise debt-servicing costs for many firms, adding to financial pressures.’
Some of the biggest names in Australian construction have become insolvent over the past year, including Probuild, Home Innovation Builders and Privium. Pictured is a female tradie
The RBA said there could be wider implications to all the recent collapses.
‘There is potential for financial stress to spread to other businesses within the broader construction industry and to some households,’ it said.
The Reserve Bank said the industry crisis was affected by ‘ongoing delays as a result of supply-chain disruptions, inclement weather and illness-related workers’ absences’.
These factors have contributed to ‘further increases in costs and have delayed when payment milestones are reached.
‘According to industry contacts in the Bank’s liaison programme, construction delays for detached homes are currently around 12 weeks on average – and much longer than this in some instances,’ it said.