News of another builder, Queensland-based Oracle Property Group, biting the dust is not unexpected given there is no end in sight to the escalation in the cost of building materials and labour shortages.
But according to Master Builders Queensland chief executive Paul Bidwell the building industry so far has weathered the storm better than it was initially thought it would.
“We thought there would be more failures,” he said. “That hasn’t happened and I’m pleasantly surprised.
“But we have had some [collapse] … in relative terms, however, given that we’ve got 70,000 licensed contractors in Queensland, it’s just a handful.
“That’s not diminishing the problems faced by those companies, their clients and all the people in their supply chain that didn’t get paid and lost out in significant ways. It’s a tragedy for them.
“But I honestly thought by now we’d have more builders go to the wall.
“Unfortunately, I think sadly there will be others. It must happen given that there is no end in sight for the price rises and the delays, not this year and not even next year … although by the end of next year it may have settled.”
Bidwell said many builders had gone to “great lengths” to prop up their balance sheets.
“Experience has shown builders are a lot more resilient than what we gave them credit for,” he said. “And a lot of them are telling me they’re getting on top of the costs and the contracts they are signing now are profitable,” he said.
“That’s good, they've redadjusted … but the costs keep going up so what they think is going to be profitable, who’s to say it will be in the fullness of time.
“I mean, what else is going to happen? Who would have predicted the Ukraine war and the impact it has had on the cost of construction? You’d be pretty brave to say there’s clear sailing ahead.”
Oracle Building Corporation, trading as Oracle Platinum Homes and Oracle Hunter Homes, was placed into voluntary liquidation on Wednesday owing an estimated $14 million and with almost 300 home owners holding building contracts with the company.
A statement from appointed liquidators Bill Cotter and W. Roland Robson of Robson Cotter Insolvency Group said the business had ceased to trade immediately and no further building activity would be undertaken.
The company’s projects—in south-east Queensland and the NSW Hunter Valley and Central Coast regions—ranged from not yet commenced through to nearing completion.
About 70 staff have lost their jobs.
According to the liquidators, Oracle director Tom Orel was “fully co-operating … with a view to maximising the prospects of recovery for all classes of creditors”.
“Mr Orel has highlighted the well-known difficult circumstances prevailing in the construction industry, including the recent and rapid rise in costs of construction materials eroding the company’s margins, and substantial delays experienced in securing supply of materials and labour, as all contributing to the company’s position,” the statement said.
“These factors resulted in cost overruns and delays in project completions, which severely impacted the company’s cash flows and it’s capacity to continue to operate, despite the owners and staff of the company’s best endeavours.”
Oracle, like many builders, supercharged its pipeline of home projects between 2020 and 2021 off the back of the federal government HomeBuilder stimulus.
According to the Queensland Building and Construction Commission, the company held a category six licence that allowed it to complete work worth up to $240 million each year.
“They’re a big company and have done big numbers over the years so I think they had capacity to build lots of houses but whether they took on too many I just don’t know,” Bidwell said.
“The environment they were operating in was just the same as everybody else. Really there's not much that has changed, it's just that it caught Oracle.”
But Bidwell said there were signs of underlying financial stress with some of the company’s clients and contracted home buyers contacting Master Builders Queensland “months and months” ago over issues, including delayed builds and demands for more money.
“We’ve had some builders go down, they are the next one and regrettably they won't be the last,” he said.
Oracle joins the industry’s growing casualty list—including ProBuild, Condev, Pindan Group, Privium Homes, BA Murphy Constructions, New Sensation Homes and Pivotal Homes—as it continues to combat a slew of unprecedented challenges.
Stretched supply chains, rising materials costs, labour constraints, weather events and project delays have hit the sector, crunching the margins of fixed-price building contracts.
