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This week in home building news! Catch up with Az and a colourful array of guests, to hear about who's killing it, who's innovating, and who's getting into strife in the world of new home construction.
Az (00:17)
Good morning and welcome back to the Good Builder Podcast. I've got three quick stories for you today. We're going to talk about the Bathla collapse. If you saw the podcast Monday with Chris Baskerville from Jirsch Sutherland, we talked about where the money is gonna go, what's happening, what you've got to look out for, especially in relation to that massive collapse which happened in New South Wales. We've then got a really interesting court decision around a tiny home on wheels.
And then if you haven't heard, and now I sound like that lady from that movie, and then, but if you haven't heard, one of Japanese biggest housing businesses just took a controlling stake in a Queensland builder. We dropped that little story the other day. So we're gonna talk about that. And then we're gonna get into something that a lot of you out there are talking about all around Australia. We've been asked a few questions around what is going on.
Things have gone a little bit quiet, not everywhere and not for everyone, but we've now had enough builder to say that inquiries have slowed and clients are taking their time, that we've had a look at the market. And we're gonna kind of tell you what's been going on from the budget announcement, which happened earlier this year, and it's been quite interesting in terms of consumer confidence and also the housing values around Australia. So
We've got a fair bit to get into, and we will get into it with headline number one, which is Bathler. So, first up, we obviously have been covering this one quite heavily, and that is because the Bathler Group went into voluntary administration in August with about a debt of 3.4 billion. And rather than just keep reporting the numbers like a lot of media outlets are doing, what we're trying to do here is
Put your questions and things you're worried about out there for the people that we reached out to in New South Wales and talk about what is actually going to happen. And we brought on the expert in insolvency and insolvency practitioner, Chris Baskerville, as I mentioned earlier in the podcast. And one of the biggest questions was pretty simple: who actually gets paid first? And unfortunately for subbies and suppliers out there,
You guys generally are gonna sit a fair way down the queue. Secured creditors have claims over secured assets. The cost of administration itself needs to be dealt with, as we talked about in the pod. Go back and listen to it. I'll put the link below this one. And then employee entitlements receive priority in liquidation. And unfortunately, ordinary subbies and suppliers are generally unsecured creditors in most cases.
That doesn't automatically mean that you're going to receive nothing if this affects you out there, but it does mean there is no guarantee that you'll recover anything if you're owed. And in some collapses, the return to unsecured creditors can be very small. The other important point Chris made is time. The administration this large doesn't get untangled in a fortnight. There are hundreds of companies, hundreds of lenders and developments and assets and contracts and creditor claims to work through. So
For all of you out there, the crux of that interview, and as I said, I'll put the link below. If you are exposed to the Bathler collapse, this isn't simply a question of how much money might come back. It is also when and how. And the uncertainty itself can put an enormous pressure on you out there. So we're feeling for you guys, and we're gonna try and get a bit deeper and we're gonna keep an eye out for the reports that Chris mentioned out there. But smaller businesses, sub you
trades suppliers further down the chain are gonna have to wait a little while. So that's a unfortunate way to start the pod, but it's the reality of the situation. And as I said, listen to that podcast we dropped on Monday. It's got a lot of good information from Chris there. Now headline number two was a really another interesting little article that we've been writing about. And with all the talk about prefabrication and tiny homes and modular homes and all this stuff, this one was a bit of a boomer.
a New South Wales land and environment court case involved a tiny home on wheels being used as a permanent residence on rural land. So the court accepted that the structure could be legally considered a caravan. But the important part actually is this. That didn't mean the occupants
could ignore planning requirements. the issue wasn't simply what the structure was, it was how the land was being used. And I think that's a lesson for builders, designers and consumers. Putting wheels underneath something doesn't automatically remove planning law from the equation. Tiny homes absolutely have a role in Australia's housing mix.
But the regulatory conversation needs to start with where it's going, how it will be occupied, and what that use means under the relevant planning scheme, not whether someone can technically tow it away, which is what actually happened in this case. We've put the story up on the site. So for all you tiny home builders, anyone interested in all that sort of thing, go and check it out because it's a very interesting case. And I think we're going to see a bit more of this out there.
As we're into this housing crisis and as people are looking at this and it becomes more popular. There's been a few people online talk to us and sort of say, you know, that tiny homes and prefabrication are part of the answer to it, but we've got to look at the whole system. We've got to look at the planning laws, the regulation, and they're completely right. And you can see that here. So go and check out that article if you're involved in that space, so you can give the right advice to your
customers and also you you're not putting yourself at risk when you're putting things out there, your reputation and all those sorts of things. So that was a really interesting story and that was headline number two. The third headline I want to take you through is something that is quite significant for Queensland. And we've seen a bit of this happen over the past year or two with some of Australia's most successful builders. And that is that Japanese manufacturing giant Sekasui Chemical
Has agreed to acquire and control 51% stake in Queensland's AUSBUILD for 335 million. That values the business at around 670 million, and AUSBUILD has already delivered more than 10,000 homes and has a pipeline of another four and a half thousand waiting to be built. But the funny thing was that the actual transaction wasn't the thing that interested us here at the Good Builder.
It was actually who's buying it. Japan has decades of experience with factory based and industrialized home construction. And we've been talking on the podcast and running a few articles and different things all about this and how a lot of the industry is focusing on modular construction and manufacturing. And as an example to see that, if you have a look at what Metricon just did down in Victoria, they delivered a prefabricated home.
Which was all over the media and it is going to become a thing. When you see the Australia's biggest builder doing it, you know others are going to follow. So this one's really interesting. We've spoken to people like Anthony Jenkin about this exact issue. How do you remove the variability? How do you improve quality? How do you build more efficiently when labor is difficult to find? And how do you stop reinventing the wheel on every single house?
So this one's going be really interesting to see what Sekasui actually bring to AUSBUILD over the next few years. And there's some big plans over the next three years, which we've outlined all in the article. So go and check it out. And if you think about it, if Japanese manufacturing knowledge starts being applied at scale in Queensland's private residential market, it could become a very interesting case study for the rest of the industry and if they see more opportunity with some of
more of Australia's successful builders. So that one is a very interesting story and another big building company, very successful. A big congrats to them too, because to drive a business, you know, to a size where you're getting international attention is is quite cool, albeit you know that they've lost a bit of that ownership, but I'm sure they did it strategically so that we're able to build more and build more efficiently for the people they build for. So that is a really cool story. Go and check it out.
Again, link is in the below. Now the three headlines are out of the way. The thing that I wanted to try and answer for you today or or what we're looking at at the moment, let you know what we're looking at, is around that why does it feel so quiet? We've heard since the budget from a lot of our build community, a lot of the builders we're close to, and we're talking big builders, small builders, all sorts of stuff, that it's gone quiet.
Phone isn't ringing as much, inquiries aren't converting as quickly, and people who were ready to build six months ago really aren't now and sort of saying, we'll wait. And that's pretty interesting. So if you have a look, in May, private house approvals actually rose to their highest level since September 2021. In June, this is sort of all sort of following the budget and budget announcements. Australia recorded more than 10,000.
private house approvals for the sixth consecutive month. So there was a genuine detached housing pipeline sitting there. But these are approvals and not contracts. And we must make that definition because approvals are not actually built in the ground. They're not even deposits and they're definitely not cash flow through a builder's business today. All you guys out there and girls, it's not in your bank accounts. So there's a bit of a lag.
Then since then, we started seeing signs of hesitation appearing in the numbers post the budget. Private house approvals fell nationally by 4.2% in July. Here in Queensland, they drew they fell 5.5% for the month. And that doesn't mean the housing market has collapsed. It hasn't, but I think it supports what builders are telling us. Something has changed in consumer behavior. And I don't think we can put it all down to the budget itself.
The timing of the budget matters, but look at what households were dealing with around the same period. The Reserve Bank increased rates three times in the first five months of 2026. By May, the cash rate was back at 4.35%. And at the same time, inflation had picked back up. Fuel and energy costs, because of everything that was going on with the war and inflation and all that stuff are under pressure.
And the RBA has been openly saying that household and business spending needs to slow. And consumer sentiment reflected it. And that's what we look at. There's a report out there, and we've talked about it a few times, but the Westpac Melbourne Institute Consumer Sentiment Index fell to 80.6 in June.
That's a consumer who's feeling not particularly confident about making a major financial commitment. And building a house might be the biggest financial commitment they'll ever make. So if you put yourself in the client's shoes with all of that stuff going on, the budget and then the lifestyle pressures, your mortgage has just become a lot more expensive. The cost of living is still high. You're hearing that inflation is the problem again. You're hearing that rates could remain higher. You're seeing uncertainty overseas.
You're reading stories about major construction businesses collapsing and then you're sitting across the table from a builder looking at a eight hundred thousand dollar contract for a build, a million, maybe one point five, and what do you do? You wait. It's not necessarily because you don't want to build, it's because you don't want to decide today. And for a builder that's enough to make the market feel dramatically quieter.
The thing we're seeing is construction doesn't need demand to disappear for businesses to feel it. You only need a decision cycle to stretch. And that's what I don't think a lot of the politicians and things understand. It's a long cycle, and to extend it further and to put pressure on cash flow is gonna see more insolvencies. And we kind of talked about that on Monday with Chris. Your pipeline stretches out, deposits arrive later, pre-construction takes longer.
You've got holes appearing in the program and then you don't get your cash flow basically until you hand over the home. That happens a lot out there for a lot of builders because money's just going out the door as you're building the home as you you all know out there.
So there's still an underlying enormous need for housing in Australia. There are still homes being approved, there are still projects being built, but affordability and consumer confidence is determining if people actually press the button. And right now, households are giving plenty of reasons not to press the button.
There's also one more layer to this as well that we're having a look at. And as I said, I put out a little post the other day on our Instagram and I put it on LinkedIn as well. But there's another layer to it as well that we're looking at, and that is credit. BAFA might look like a completely separate story to what's happening but we've already seen private credit funds restricting investor withdrawals and becoming more cautious about construction lending. That's particularly relevant to development work.
So if developers find finance harder to obtain, projects that work financially at one interest rate suddenly don't work at another. And they don't necessarily disappear forever. They get deferred. And again, that feels like quiet on the ground when we need developed land and all the developments to happen in terms of trying to hit that housing number that everyone's talking about. So I think for me,
This is what I'm looking at at the moment, and what we're going to write about, we're getting the team to have a look into this. I think there's three different things that are happening at once. You've got the cost of money, you've got consumer confidence, and then you've got project feasibility, and all three will affect the decision to build, and that is why it is a bit quieter and it is not under the control of the builder or the client. So, what do you do from here?
I wouldn't panic and I definitely wouldn't look at this and immediately start discounting work to keep everyone busy. We've seen where that road leads for all of you guys out there and we talk a lot about a race to the bottom. If the market becomes more competitive, knowing your numbers becomes more important, your pipeline needs more attention, your pre-construction process needs to be tighter, and you probably most importantly need to communicate with prospective clients better.
And be on the front foot when you're doing that, especially in your sales and your sales process and your customer experience. Because a hesitant client isn't necessarily a lost client. They might need more certainty, they might need more trust, they need more certainty around their price, more certainty around finance, more certainty around the process, and certainty that the builder they're considering will still be around to hand on the keys. And we're seeing that a lot. When you look at the consumer index, that is what they're indicating. And we did a report.
around June or July, which was a quarterly report on what's going on out there. And we we actually surveyed a few customers and they're saying they're de-risking their build now. They're not as I guess positive about the build. It's not something that they're aspiring to. They know they need it. They do aspire, they do want it, but they're de-risking what they're building and who they're choosing to build with. So if I leave you with anything, that would probably be my advice is to concentrate.
on that stuff. So that's probably how I'm reading it right now for everyone out there because we're getting asked a lot of questions around that and we'll put a lot more content and different things around this. But the conditions absolutely support what the builders and all you guys out there are telling us. People are more cautious, money is more expensive, and projects are being looked at harder and they're actually harder to complete. We'll keep watching what's going on and keeping you informed.
And we hope this episode has really informed you about what's going on around the country, what's happening with some exciting stuff that's going on out there, keeping you on the forefront of things to think about. And then I hope that last little bit answered a few of your questions because we've had a fair few builders reach out and everyone that sort of comes into the studio here or you know, they meet with us out on the road via video or whatever, we're getting that from every builder around the nation. So you're not the only one if you're feeling the same out there.
I and I I know that might not make you feel better, but just know that it is affecting the vast majority. And we're talking the big guys down, the small guys. We've heard some of the big guys down 30, 40 percent in sales. So that's the way that the market is looking right now. Well, that's the episode for today. this Friday we have an absolute boomer of a podcast. We have James Drever, the CEO of QA Build, the fastest growing builder in Queensland.
Who's also the national building manager of Gem Life. They are a beast of the business, and I tell you, they do things very differently. I know that some of you guys out there aren't at that scale, and you don't want to be at that scale, but there's a lot of good lessons within what James talks about because he's doing it at that scale and at that level, and he is one of a kind. So I would go and check that podcast out. And until then, you will hear from me on Friday.
But have a great week if you have any questions. We really appreciate everyone that's sending questions for the Bathla podcast. And we also appreciate everyone that comes to us and talk to us about what is going on in the market and giving us a few things to go and have a look at so we can report back to the industry. So until then, build strong, build safe. I hope all you out there have a great end to the week and keep an eye out for that podcast on Friday. and we'll see you then. So like and subscribe.
grabing all those things. But yeah, that's it. Thank you.