Commonwealth Bank CEO Matt Comyn reveals why building companies are really collapsing

Commonwealth Bank CEO Matt Comyn has blamed rising costs on a spate of collapsing construction companies.

The head of Australia’s largest home lender told a parliamentary hearing that companies operating on fixed-price contracts were particularly vulnerable.

“We are very concerned,” he said via a video link to the economy committee of the House of Representatives on Thursday.

Mr Comyn, who is ill with Covid, said the industry was facing challenges including “everything from the weather to a very significant increase in input prices’.

“Some of the companies that have been working with a lot of fixed-price contracts — where they’ve clearly been forced to honor those contracts put themselves under real financial pressure,” he said.

Mr. Comyn expressed his fears to Liberal MP Bert van Manen after CoreLogic’s Cordell Construction Cost Index showed construction costs rose 8.4 percent in the year to June.

This was much higher than the annual inflation rate of 5.6 percent in May.

So while the consumer price index moderated from April’s 6.8 percent, construction costs remain high.

Sydney-based luxury homebuilder Millbrook Homes filed for bankruptcy on June 26 with debts of more than $4 million, while Melbourne-based builder Bentley Homes appointed a liquidator on June 30 to clear its $1.8 million debts.

Porter Davis, Probuild, ABG and A1A Homes have also recently entered receivership.

Mr Comyn said building collapses and labor shortages were of particular concern as the Treasury expected a record 400,000 new migrants to arrive in Australia in the year to June.

Nearly 1.5 million migrants are expected to arrive in Australia by July 2027.

“We predict a very significant housing shortage over the next five years,” said Mr Comyn.

Sydney-based luxury homebuilder Millbrook Homes filed for bankruptcy on June 26 with debts of more than $4 million, while Melbourne-based builder Bentley Homes (construction site pictured) appointed a liquidator on June 30 to settle its $1.8 million debts to arrange

Sydney’s median house price rose 2 percent in June to $1.324 million, despite the Reserve Bank’s 12 rate hikes since May 2022 that have pushed cash rates to an 11-year high of 4.1 percent.

CoreLogic head of research Eliza Owen said a housing shortage supported a house price recovery.

“Despite high inflation and 12 interest rate hikes in 14 months, an imbalance between supply and demand across the country has put a floor under prices,” she said.

“Unprecedented rent increases, continued low vacancy rates and record levels of net overseas migration also continue to support housing demand.”