Master Builders Victoria (MBV) analysis of Australian Securities and Investment Commission (ASIC) insolvency figures shows that 106 Victorian building and construction companies – almost a third of the national tally - entered external administration in the three months to December 2021.

Nationally, this period saw 328 building and construction companies across Australia enter external administration, up 29 per cent on the same quarter last year.

There were a total of 1082 building and construction insolvencies in Australia in 2021, with Victoria accounting for 34 per cent (364) of these, second to New South Wales (36 per cent) and Queensland (16.5 per cent) third. 

The volume of building and construction insolvencies is still quite modest by historical standards, but it has been trending higher over the past six months.

MBV CEO Rebecca Casson said soaring costs for materials, combined with labour shortages, may lead to more building and construction companies being forced into insolvency.

"The proportion of insolvencies accounted by building and construction has grown steadily over the past two years. It is now close to the highest it’s ever been since data recording started in 2013,” she said.

“In Victoria, building and construction accounted for 30.2 per cent of all insolvencies in the state in the three months to December 2021.

"Over the final three months of 2021, well over half of building and construction business insolvencies were accounted for by creditor wind-ups (57.6 per cent).

"A further 16.8 per cent resulted from court wind-ups and 12.2 per cent from voluntary administrations in Australia.”

While welcome, Ms Casson said the boost in demand for building new homes had placed enormous pressure on Victoria’s building and construction industry, predominantly in the form of supply and trade shortages.

“We know that the cost of building a home in Victoria is rising faster than in any other state because supply prices have hiked,” she said.

“The average cost of supplies used in home building rose 13.5 per cent in the year to December in Melbourne, compared to 12.9 per cent in both Brisbane and Adelaide, with a 12.0 per cent on average across Australian cities.

“With building contract prices locked in, the large and unanticipated surge in the prices of many building items such as timber and steel-based products means that many of our members are finding that the cost of completing work is more costly than expected.”

Ms Casson encouraged consumers to be kind and patient with builders during these unprecedented times and to talk to their builder should any unexpected price rises occur.

“Generally speaking, consumers will be offered a level of protection against price increases when they have signed a fixed-price contract,” she said.

“However, there are some instances, albeit limited, in which cost increases can validly impact existing contracts.

“We encourage consumers to read contracts thoroughly before signing them and to seek legal advice to help understand them.

“In addition, consumers should feel confident in speaking with their builder throughout the building process if they have any concerns or queries.”

MBV is actively involved in finding supply shortage solutions to ensure sustained growth for the building and construction industry.  

Ms Casson said it was evident that the building and construction industry continued to contribute to the overall health of the Victorian and national economy.

“Building and construction is critical to the state’s fortunes, being the largest full-time employer in Victoria, supporting more than 320,000 jobs,” she said.

“Our industry remains Victoria's largest full-time employer and contributes over 46 per cent of the state's tax revenue, with the housing sector alone generating $3 of economic activity for every $1 invested.

“When local government tax is included, the building and construction industry accounts for more than 57 per cent of the state’s tax revenue.

“This money is used to benefit all Victorians in new infrastructure, important road and rail projects, hospitals, and new schools.”