DEKYAS NEWS World Breaking News and Trusted Source
Related Articles
Watch Insight’s Buildings Blocked episode — with buildings overrun, business owners drowning in debt and taking a heavy toll on their mental health, what can be done to rebuild a broken construction industry? — on Tuesday at 8:30pm on SBS or on .
When Sid Prakash decided to build a single-family home in 2018, he didn’t expect it to still be unfinished six years later.
Like many Australians, Sid dreamed of having his own place.
But what started as a positive experience changed as the months passed.
“It was a dream that eventually turned into a nightmare,” Sid told Insight.
Eighteen months after Sid signed the contract to build with Pinnacle Builders, the company went bankrupt in 2020, leaving the Melbourne family with an unfinished building with several defects.
For the family of four, the construction delays meant they had to live with Sid’s parents for the past six years.
“I can’t imagine what would have happened if this hadn’t been an option,” he added.
Data from the Australian Securities and Investments Commission (ASIC) shows that almost 3,000 construction companies (or eight per day) went bust in the last financial year. That is more companies that went bust than in any other sector in the country.
As record numbers of builders go bankrupt, experts say there are insufficient protections for homebuilders and buyers affected by the fallout.
Lack of protection makes consumers vulnerable
Bradley Hastings researches corporate failures in the construction sector.
As a researcher for the University of New South Wales’ Business Insights Institute, he found that the lack of consumer protections is becoming more apparent at a time when confidence in the industry is desperately needed.
“When I compare deposits for a house to other major investments that Australians make in their lives, like superannuation or even bank savings, there are protections in place for those types of investments,” Hastings said.
“In residential construction, these rules and controls do not exist.”
Hastings says that the money a person pays to their builder does not necessarily have to be used for that builder’s project, but is free to use it for other purposes.
“So I might pay a deposit to a house builder, and they can spend that however they want. They can buy a new Toyota Hilux, or go on holiday to Thailand,” he said.
“There is currently no regulation that requires money to be set aside and put into an account to be spent on the project I am investing in.”
Out of pocket more than $800,000
When a construction company goes bankrupt, consumers are not the only ones who feel the domino effect of the strained sector.
In March 2024, Rork Projects, which fitted out and renovated buildings for major Australian clients, including many government agencies, went bust, owing more than $25 million to creditors.
The company went into administration, citing a “tsunami of impossible economic circumstances.”
There were 63 active projects underway in various states.
When Rork Projects went bust, subcontractor Chris Nowaczyk was sitting in the pub drinking a pint after a week of working with his carpentry business in Canberra.
He received a phone call that would turn his life upside down: Rork had been declared bankrupt and would lose more than $800,000.
“I borrowed money from my friends to pay my staff,” Nowaczyk told Insight.
Amie and Anthony Lloyd, who own a small carpentry business in Canberra, were also hit hard by Rork’s bankruptcy. However, it was not the first time they had been in bankruptcy.
“We have been working on three tasks: Project Coordination, Rork Projects and National Projects and Maintenance,” Anthony told Insight.
Together, the collapses cost them nearly half a million dollars.
When a builder goes bankrupt, subcontractors’ debts don’t disappear. They still have to pay their own overhead costs, such as suppliers, employees and taxes.
Amie believes that many construction companies “run up millions of dollars in debt and then just go out of business.”
“It’s just another kick in the stomach,” Amie said.
According to Professor Jason Harris, there is a lack of regulation as this would hinder progress towards housing construction targets. Source: Delivered
The watchdog that no one is afraid of
University of Sydney corporate law professor Jason Harris says the problem of insolvent trading in the construction industry is widespread and is not being adequately monitored by ASIC, the federal government’s watchdog.
“ASIC only looks at less than 1 percent of the files that liquidators send to them that show evidence of insolvency liability,” Harris told Insight.
“There just aren’t the resources, the manpower or the money to actually address this problem. It’s a problem of enormous proportions.
“It’s the watchdog that no one is afraid of because not enough of these kinds of things get reported.”
While many of these companies withdraw and subcontractors take on their debts, many return as directors of a new company and continue their operations.
“Unless we can prove that these directors have broken the law, and ASIC then bans them or the court disqualifies them, then they are free to set up as many companies as they like.”
“The bad guys know the chances of getting caught are slim, so they keep doing it.”
“People have turned this into a business model.”
SBS Insight contacted ASIC but declined to comment.
Why the government is happy with things the way they are
The problem of subcontractors having to pay money when a contractor goes bankrupt is not new.
In 2012, Bruce Collins prepared a report for the New South Wales Government which made 44 recommendations to address the problem of subcontractor underutilisation.
In 2015, the topic was examined in a similar manner in a report from the Senate Economics References Committee.
Despite this, they are often left in a financial vacuum when a company goes bankrupt.
According to Harris, governments are happy not to address the situation because effective regulation would slow the pace of construction and make it more expensive.
“I think that’s the trade-off we make as a society. That we say we want more houses, we want them faster, we want them cheaper. But that comes at a price.”
Sid says he would never build his own house again if he had the time.
“Anyone who wants to build a house now can expect a lot of pain,” he said.
“Consumer protection is insufficient, the situation is difficult.”
Sid’s family does not know when the construction of their house will be completed.
And for more stories go to hosted by Kumi Taguchi. From sex and relationships to health, wealth and heartache, Insightful offers deep dives into the lives and first-hand stories of former guests of the acclaimed TV show Insight.
Follow Insightful on the , , or wherever you get your podcasts.
