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

Commonwealth Bank chief executive Matt Comyn has blamed surging costs for a spate of construction companies collapsing.

The head of Australia’s biggest home lender told a parliamentary hearing companies that operated with fixed-price contracts were particularly vulnerable.

‘It gives us real cause for concern,’ he told the House of Representatives economics committee via video link on Thursday.

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

‘Some of the companies that have been operating with a high proportion of fixed price contracts – where they were obviously forced to honour those contracts that put themselves under real financial pressure,’ he said.

Mr Comyn revealed his fears to Liberal MP Bert van Manen after CoreLogic’s Cordell Construction Cost Index showed building costs surging by 8.4 per cent in the year to June.

This was much higher than the 5.6 per cent annual inflation rate in May.

So while the consumer price index moderated from April’s 6.8 per cent level, construction costs remain elevated.

Sydney-based luxury house builder Millbrook Homes went into liquidation on June 26 owing more than $4million, while Melbourne-based builder Bentley Homes appointed a liquidator on June 30 to sort out its $1.8million debts.

Porter Davis, Probuild, ABG and A1A Homes have also recently gone into administration.

Mr Comyn said building collapses and labour shortages were a particular concern with the Treasury expecting a record 400,000 new migrants to have arrived in Australia in the year to June.

Close to 1.5 million migrants were expected to arrive in Australia by July 2027.

‘We forecast a very significant shortfall in housing over the next five years,’ Mr Comyn said.

Sydney-based luxury house builder Millbrook Homes went into liquidation on June 26 owing more than $4million, while Melbourne-based builder Bentley Homes (construction site pictured) appointed a liquidator on June 30 to sort out its $1.8million debts

Sydney’s median house price rose by two per cent to $1.324million in June, despite the Reserve Bank’s 12 interest rates rises since May 2022 that have taken the cash rate to an 11-year high of 4.1 per cent.

CoreLogic head of research Eliza Owen said a shortage of housing was underpinning a recovery in house prices.

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

‘Unprecedented increases in rent, persistently low vacancy rates and record levels of net overseas migration is also continuing to support housing demand.’