- Hamlen Homes, EQ Constructions and Delco Building Group all went bust in February.
- The construction industry began to slow down when the HomeBuilder payment ended.
- Construction costs, interest rates and a lack of labour mobility must ease for recovery.
The downturn in the construction industry has seen another builder go under, with Perth-based Hamlen Homes folding on Monday.
Hamlen Homes was approved to develop a $50 million urban village in Perth’s East Victoria Park called East & Co, before it went out of business.
The builder was also in the process of constructing seven family homes, with many of them already having been delayed by more than two years.
It’s alleged a client of Hamlen Homes has taken legal action against the building company after no progress was made on the construction of their property in four months, according to The Daily Mail.
In response to a complaint, the firm claimed there was a severe shortage of workers and materials available to complete those projects.
Stalled Developments
Across Perth, rising construction costs and red tape continue to make construction and development difficult with a number of high-profile projects running behind schedule.
Development has stalled at the Kings Perth Hotel complex at 517-533 Hay Street in the CBD, which was initially purchased in May 2010, while Fremantle’s historic heritage building Elders Wool Stores is still in limbo along with the South Fremantle Power Station site.
Hamlen not alone
Nationally, Hamlen Homes is the third builder to go out of business in a matter of weeks with EQ Constructions in Sydney and Victorian-based, Delco Building Group going out of business in early February.
EQ Constructions, which employs around 40 staff, collapsed owing at least $40 million to between 400 and 500 creditors.
The failure has put apartment complex projects in jeopardy in Parramatta, Bowral and other regional centres throughout the state.
The company had also won a $600 million residential development bid to build hundreds of apartments in Zetland, in Sydney’s south.
Industry-wide slowdown
Housing Industry Association, Chief Economist, Tim Reardon, said the construction industry began to slow down when the government’s HomeBuilder payment ended.
Mr Readon said, “The market was also cooling as the cost of construction rose, and the change in consumer preferences due to the pandemic desire for space eroded,
“The adverse impact of the fastest increase in the cash rate in a generation will not be fully observed in building approvals data until later this year, and will not hit building activity on the ground until late 2023.
Mr Readon said the significant pipeline of work that Australian builders are still completing, combined with ongoing materials and labour constraints, is creating significant lags between the RBA’s hiking cycle and on-the-ground activity.
He said, “This lag from the first rate rise until it impacts employment is dangerously long in this cycle.
“The RBA needs to be very cautious in raising rates as the impact of their actions won’t be observed in official data for nearly 18 months, in this cycle.”
“The multi-unit sector also contracted further between 2021 and 2022, despite the expected return of overseas migrants, students and tourists, and the ongoing tightness in rental markets” said Readon.
