Building companies are haemorrhaging cash as the construction sector battles rapidly rising wages and material costs.
Almost one in three large home builders are haemorrhaging cash as the construction sector battles rapidly rising wages and material costs, leading to a surge in insolvencies.
The constraints have slowed the production of new homes and are prolonging a boom that for many builders is profitless, as they find themselves crunched by rising costs and fixed-price contracts they have little scope to vary. In south-east Queensland – the country’s strongest commercial property market – more builders would go broke in a market that was now “completely overheated”, Mr Hutchinson said.Construction sector insolvencies have increased steadily since 2021 as a result of the mounting financial pressure, with the industry accounting for one in three corporate bankruptcies over the past year, the RBA said.“A lot of subcontractors have gone broke.
While material price pressures have normalised, Australian Constructors Association chief executive Jon Davies said rapidly rising wages had become the primary concern for builders.He said builders were being asked to take on an increasing amount of price risk, meaning the sector had borne the brunt of material cost increases associated with the COVID-19 pandemic and Russia’s invasion of Ukraine.
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