The news last month that major builder Probuild had collapsed was an ominous sign that more builders could face the same fate, warns KR Peters Director Peter Nicolls.



Probuild and 17 other businesses collapsed when their South African parent company, WBHO South Africa, withdrew its financial support.



WBHO has annual revenue of $1.4 billion. Its Australian projects are now in limbo, including 13 projects in Victoria. The collapse will affect around 750 direct employees and contractors.



In a statement WBHO blamed the Australian government's "hard-line approach" to managing the COVID-9 pandemic citing border restrictions, snap lockdowns and work-from-home orders affecting many sectors.



"The signs are ominous that many more builders will face the same fate as Probuild as they have a massive workload in front of them and struggle to make a profit due to their inability also to deliver the product," said Mr Nicolls.



He said Probuild was the fourth major builder to be placed in administration in recent times, even as the property market boomed.



"Over the years major builders have collapsed during boom times, not because of their inability to get work, but because of them taking on too much work," said Mr Nicolls.



"History shows that in the 1970s Spaceline Homes collapsed because they could not fulfill their contractual obligations."



Mr Nicolls said other high profile collapses include Avonwood Homes in 2000, Privium Homes and B.A. Murphy in December 2021, and the Tasmanian arm of Hotondo Homes in January 2022 - all for the same reason.



He said escalating costs, a shortage of skilled labour and delays caused by material shortages have taken their toll.



The Victorian Government's Big Build projects were also playing a part, draining the pool of available skilled labour.



"The new West Gate Tunnel, the Metro Tunnel and the Level Crossing Removal Project have taken tradies off building sites and caused mayhem for the building industry with builders unable to source staff," said Mr Nicolls.



"They’re all working on those projects for above award rates from the government, exacerbating the problem."



Mr Nicolls said he was confident that in the case of Probuild there will be many suitors ready to step up.



"Multiplex would be a prime candidate as they are big enough and have the ability to take on more work," he said.



Administrator Deloitte is now working out what is salvageable and if money can be recouped to creditors.



"Once the losses are qualified the administrator Deloitte will calculate what amount they will receive as payment for monies outstanding. At present there are claims that $14 million is owed to contractors.”



"This then has a flow-on effect in that they are also placed in administration as they are unable to meet their liabilities."



"Also affected are the purchasers of apartments in residential blocks being constructed by Probuild who are going to be inconvenienced by time delays and the stress of not knowing what’s happening for a while."



Mr Nicolls said the Probuild collapse is the latest sign the construction industry is “not in good shape".



"The problem is that the time to construct has blown out and all the materials have gone up in price," he explained.



"The Probuild collapse won't have a major effect on the property market as other builders will step in, but it will have an effect on people who have tried to make an honest living and now see it all gone before their eyes.



"This saga is a sign of the times and the moral of the story is never pick the cheapest builder."