‘Profitless boom’ behind collapse crisis

One of the key factors behind Australia’s housing crisis has been revealed, fearing major companies like Metricon will not survive.

The Australian housing sector is experiencing a “profitless boom” as the sector struggles under the weight of a skilled labor shortage and spikes in material costs.

And it’s not just businesses feeling the pressure, consumers are also dealing with the consequences in the form of lengthy construction delays and unexpected cost bursts.

Supply chain delays are also adding to the chaos, with thousands of Aussies left in the dark as they are forced to wait for construction materials to become available before work can resume.

As a result, construction times have increased from about eight months to a year, according to a new report released today by the Housing Industry Association (HIA).

The report also shows that the number of detached homes under construction has grown exponentially, by 75 percent more than in 2019.

Rising construction costs, rising at about 15 percent a year – the fastest pace in more than 40 years – are proving to be a disaster for housing associations.

Steel prices are 42 percent higher than last year, wood is 21 percent higher, electrical products are 14 percent more expensive and plumbing costs are up 13 percent.

Rising costs and construction delays are leaving these companies behind with fixed-price projects to be completed by early 2021 and essentially making no profit.

HIA chief economist Tim Reardon said: The Daily Telegraph that these are the contracts that are the most challenging.

“Profitless tree is a correct expression,” he said.

With big names like construction giant Probuild, Gold Coast-based company Condev and smaller operators including Hotondo Homes Hobart, Home Innovation Builders and Next all collapsing this year, it’s clear that the Australian construction industry is on the cutting edge. .

Russ Stephens, co-founder of the Association of Professional Builders, estimates that about 50 percent of Australian construction companies are currently insolvent, meaning they can’t pay their bills.

“Just one construction company collapse can affect literally thousands of consumers,” he says told news.com.au last month.

“It’s easy for a large company to put off a decision to go into liquidation for six months or even a year… But as we get to the end of the year, it’s probably safer to predict that thousands consumers could be affected by collapsing construction companies.”

Stephens said the average cost of building an Australian home had reached between $40,000 and $150,000 and warned that fixed-price contracts should disappear.

He has warned that customers would have to pile up the money for a price increase or risk their contractor going under and it costing a lot more to get their house finished.

“Builders have had to bear the costs, but what made the problem worse was not only the increase in material prices, but also the delays caused by Covid,” he said.

“Builders have a limited number of projects they can take on at the same time, and when a project usually lasts 25 weeks but has moved up to 30 weeks, that means fixed costs are increasing, but consumer costs remain the same.”

Fear of Metricon continues

There are still rumors that the Australian housing giant is on the brink of collapse after the shock death of founder Mario Biasindespite the company denying the speculation.

However, many of its customers and employees remain concerned about the company’s future.

A Queensland couple who signed a contract with Metricon before the construction of their home near Ipswich said they had not received any information about the status of their construction, with the company pointing them to a media statement in response to questions.

Emily Martin told Nine Newspapers that she signed a contract with Metricon in November, but was unsure when construction would begin.

“Between our land deposit and home deposit, we have $38,000 out of pocket, and we’re not within a month of construction starting,” she said.

Last week, acting Metricon CEO Peter Langfelder blasted the lingering allegations surrounding the company, declaring it to be “business as usual” during a press conference at a construction site, although he admitted the company experienced some project delays.

“We have a strong history of performance, all our existing contracts are profitable, we are fully up to date with all our transactions, our suppliers, our employees, commissions, everything is fully up to date,” he said.

“As far as our business is concerned, it’s just business as usual.

“Our company has been very strong for 45 years and will continue to do so” [be] for a long time.”

Despite Mr Langfelder’s claims, reports emerged that Metricon representatives had met with the Victorian government for crisis talks about the escalating problems plaguing the sector, including the rising cost of essential materials such as wood and steel.

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