OPINION: Housing solutions are hard, but ensuring homes already in the pipeline actually get built should stop the problem getting worse.
, it seems stemming the rate at which builders are going bust might at least ensure the flow of dwellings now in the pipeline doesn’t dry up further.For some hints on how we could tackle this, we turned to two industry experts who’ve seen a range of builder collapses up close: insolvency experts Jason Preston and Matthew Caddy of advisory firm McGrathNicol.
“Time is what’s getting these guys, particularly in the volume residential market. So homes that would usually take seven to nine months to build, builders are telling us that they are taking up to twice as long because they can’t schedule the materials and the trades. And then that isn’t flowing into cashflow forecasting.”
“That’s where we’ve probably seen some builders breaking the rules there, in terms of taking deposits ahead of having insurance in place.”Preston, the chairman of McGrathNicol, says one solution would be for state governments to require builders to quarantine cash between jobs. “With builders’ warranty insurance schemes, they already have different views around a builder’s capacity and credit quality. So government is taking a more active role in the sector. And I would have thought the next step would be to examine the idea of quarantining cash, certainly at the retail level, and then look at how they can contribute to solutions to the consequences of that.”
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