Oracle Liquidating Director Bill Cotter Warns Construction Firms of ‘Vicious Cycle’ Threatening Companies

The global shortage of building materials is creating a “vicious cycle” of mistrust that is fueling the devastating crisis in Australia’s construction industry.

A number of construction companies have gone under this year, while developers are increasingly forced to scrap projects as they grapple with rising construction costs and labor shortages.

Queensland residential builder Oracle was the latest to go into liquidation on Wednesday, leaving 70 employees out in the cold and halting 300 homes that were in the pipeline.

The director of the liquidation company that took over Oracle’s assets has issued a grim warning about a major problem affecting the construction industry.

“People won’t pay the company because they’re worried they won’t get supplies, the company won’t get their money, so they can’t pay their supplier,” Bill Cotter, director of the Robson Cotter Insolvency Group, told Daily Mail Australia. .

“Your suppliers don’t get your money, so they don’t provide the goods or the subbies (subcontractors) don’t do the work. An owner will not pay the next installment, so it is a vicious cycle.”

Cotter also said that rising material costs were to blame, and that product delays were occurring as a result.

construction crisis

The crisis has been caused by a perfect storm of supply chain disruptions, skilled labor shortages, skyrocketing material and logistics costs, and extreme weather events.

Another Queensland builder, Besse Construction, collapsed last week due to $1.7 million.

Earlier this year, two major Australian construction companies, Gold Coast-based Condev and industry giant Probuild, went into liquidation.

In July, the High Court ordered Snowdon Developments liquidated with 52 staff, 550 homes and more than 250 creditors owed for just under $18 million, although it was partially bought out less than 24 hours after bankruptcy.

Others also joined the list, including Inside Out Construction, Solido Builders, Waterford Homes, Affordable Modular Homes, and Statement Builders.

Then there was the New South Wales construction company Willoughby Homes, which entered voluntary administration last week, leaving at least 30 homes in limbo.

It also closed Norris Construction Group, which was in Geelong, collapsed in March with $27 million in debt. He owes about 140 employees $3.2 million that he is unlikely to be able to pay, according to the liquidator’s report.

In addition, Melbourne-based company Blint Builders collapsed with roughly $1 million in outstanding debt to 50 creditors, according to liquidators.

deleted projects

Other Australian developers have faced difficulties of late, scrapping projects and blaming skyrocketing construction costs and labor shortages.

Perth developer Sirona Urban scrapped a $165 million luxury tower, where more than 50 per cent of the plan’s apartments had been bought, which was set in one of the tallest apartment buildings in the state.

Sirona Urban owner Matthew McNeilly said in July that construction costs had risen 30 percent in the last 10 months, while a shortage of shops was also causing problems.

In the same month, Melbourne developer Central Equity abandoned plans to build a $500 million apartment tower on the Gold Coast, blaming the crisis in the construction industry and rising construction costs for causing the project is not profitable.

Earlier this month, developer Cedar Woods shelved a $180 million development in Brisbane that was scheduled to deliver 250 homes, blaming rising costs, labor shortages, significant rainfall in Queensland and deadlines. extended construction.

One homeowner described the development company’s decision as an “absolute joke” claiming that it would leave his family financially “fucked”.

Factors behind the crisis

Master Builders Gold Coast regional manager Adam Profke said a number of factors were playing a role in the problems facing the construction industry.

“It started with Covid and people slowed down in terms of construction activity, then we had a stimulus that started activity and increased demand,” he told in June.

“Covid restrictions meant people weren’t traveling and therefore saving money, so they decided to put this money back into their homes, boosting the renovation market. But due to Covid, the supply of materials was reduced.”

Profke said that demand for products had completely outstripped demand, and this was before the Russian invasion of Ukraine created even more problems.

Delays in sourcing materials due to both the Ukraine conflict and Covid restrictions meant builders were unable to complete as many projects as before, and material costs also increased.

“If you normally build 10 houses a year … but you’re only doing two or three, you lose profits and money,” he said.

“The hammer blow is the fact that what you budgeted to build the house, can’t be delivered because of that, it costs more and also reduces your profits.”

Profke said the price of lumber and reinforcing steel had risen almost 100 percent in the last 12 months. Other major items were up 40 to 50 percent.

“We are seeing price increases on a monthly basis, and although it has slowed down from last year, we are still seeing price increases for something new every month,” he said.

This is due in part to Australia’s heavy reliance on foreign materials for its home building projects.

“At one point during the Covid lockdowns, you couldn’t buy a door handle or lock from Bunnings, which was almost unheard of,” said Profke.

“Unfortunately, there are delays in almost every element of the construction supply chain across the board, as most of what we use comes from overseas.”

Unfortunately, Profke believes that more companies could collapse.

“We hope for the best, but we also have to be realistic: Some companies will not be able to sustain losses on an ongoing basis,” he said.

“I believe that all companies will be at risk at some point, no matter how big or small, companies that can better manage their risk will be able to sustain it better in the long term.

“There isn’t a builder in the industry that hasn’t suffered some sort of financial loss as a result of what’s going on right now.”

The irony is that the demand for their construction services remains high.

“The work is there, particularly in Queensland and the Gold Coast, there is a lot of demand in the industry, it is just a matter of overcoming the backlog of work,” he said.

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