The start of the year saw builder Builton Group (Platinum Homes and Aspireon Homes) go into administration (owing about $16 million to 350 unsecured creditors, mainly subcontractors), adding to a growing list of WA residential builders and subcontractors that have recently crumbled.

One of Builton’s creditors, Anstey Cabinets, was owed $1 million. The effect on Anstey of Builton’s closure was expected to be a 50% to 70% drop in turnover, and six employees were made redundant immediately.

The closure comes two months after Collier Homes went into liquidation in November 2016, and shortly after Quattro Homes went into administration in September 2016, Pitaro Homes and Nominated Homes went into liquidation in August 2016, the collapse of Shane Crothers Homes in June 2016, and of Capital Works Construction in May 2015 (when it was in the process of building 229 houses).

Why is the WA building industry falling down?

The key issues, almost all attributable to the decline in the resources sector, are:

  • Residential building activity has dropped significantly from record highs in 2014/15.The Housing Industry Association is predicting a figure of 19,780 housing starts for 2016/17 compared to approximately 30,000 per year three years ago.
  • Since June 2014, fewer people are moving to WA and more are going to the eastern states.
  • Rising unemployment, with WA’s current unemployment rate being higher than the national average.
  • Lack of consumer confidence.
  • Market pressure resulting in tight margins for builders.
  • Some builders using increased advertising and incentives as their key sales strategy, which chips away at already tight margins.

On the basis of eight indicators, including economic growth and housing, CommSec’s January 2017 State of the States report ranked WA in last place amongst Australia’s states and territories.

In October 2016, ABN Group managing director Dale Alcock said (To Business News (Western Australia) magazine (October 10-23, 2016)) that builders were already two years into a downward cycle and that “the market was bouncing along the bottom”. Mr Alcock predicted similar conditions for another 12 to 15 months, and then an upturn.

Likewise, David Simpson, chief executive of Summit Homes, while acknowledging the current difficulties in the market, has expressed confidence in a rebound in coming years.

Only time will tell when the WA building industry will pick itself up and raise the roof.

In the meantime, for all in the residential building industry there is no blueprint for survival and this is a testing time to be making any long-term concrete decisions.

If you or your client is experiencing financial difficulties as a result of the downturn in the WA building industry, please do not hesitate to contact us to arrange a free consultation to discuss the position, the various options available and the nature and consequences of an insolvency appointment.

February 2017