Construction Insolvencies Remain Low but Rising

Steve Saretsky -

News reports are circling that there are troubles in the land down under. An article from ABC News Australia reports ‘Construction companies in NSW collapsing at record rate as building slowdown bites.’

Statistics, provided by ASIC, show 169 NSW-based construction companies went into administration, receivership or a court-ordered shutdown in the June quarter. This was the highest number since Q3 2015.

Over the whole 2018-19 financial year, 556 construction companies went under, good for a 22% increase compared to last year. According to the Association of Independent Insolvency Practitioners president Stephen Hathway, small construction companies have been hit the hardest. However, even the giants can fall. Property giant Ralan group went under in July, owing creditors a whopping $500M, and leaving 2300 investors out of pocket.

While there has been some turbulence in the housing market here in Canada, there has yet to be any high profile cases similar to the Ralan Group in Australia. As per data from the Office of the Superintendent of Bankruptcy Canada, construction insolvencies remain low, but are clearly climbing after bottoming at the end of 2017.

Construction business insolvency in Canada
12 month sum of Construction business insolvency in Canada.

If there’s one area where insolvencies are likely rising it’s in Vancouver, particularly for contractors and builders in the single family space. Housing starts continue to fall as demand remains weak for brand new spec homes.

Vancouver detached housing starts.
Vancouver single detached housing starts, 12 mont sum.

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The Saretsky Report. December 2022