Earlier this month the Reserve Bank’s Financial Stability Review said what most people in the building industry already know. Company insolvencies remain high in construction, and thin margins are a big part of the reason.
The numbers back it up. 3,472 construction companies failed in 2025/26, about one in four of all company insolvencies in Australia. In August, Sydney developer Bathla Group went into administration owing about $3.4 billion. Work stopped on more than 2,000 apartments, and buyers who had paid deposits were left waiting.
The RBA also made a point that home buyers should hear. The financial system will be fine. Most of the failures involve small companies or firms with little bank debt. That’s reassuring for the banks. It’s no comfort if one of those small companies is building your home.
I’ve spent most of my working life in residential building. A builder failing is the worst outcome for a family that has sold a house, signed a contract and is paying rent while it waits. Most of that risk can be managed if you ask the right questions before you sign.
Why builders are under pressure now
Build costs are about 51% above pre-COVID levels. Most homes are built on fixed-price contracts, so when costs rise mid-build, the builder wears it. Sales have dropped sharply after four rate rises this year, and prices have fallen for six months in a row. Banks have pulled back from riskier construction lending, so some builders and developers now rely on more expensive private credit. Put those together and a builder that was fine 18 months ago can be in trouble today.
Eight questions to ask before you sign
1. How long have you been building, and under what name? Look for a long record under the same business. Check the company on ASIC’s register and the licence with your state regulator. In Queensland, that’s the QBCC licence search.
2. How many homes did you finish last year, and how many do you have on the go now? A builder that has rapidly grown its starts without matching completions may be stretched. Ask for addresses of recent handovers and go and look.
3. Who pays for cost increases? Read the contract. Know exactly which items are fixed and which are provisional sums or allowances. Low provisional sums make a quote look cheap and come back as variations later.
4. What deposit do you want, and what are the progress payments? Each state limits deposits. In Queensland it’s 5% for contracts of $20,000 or more. Progress payments should match work actually done. Never pay ahead of the stage.
5. Can I see the home warranty insurance before I pay anything? It’s compulsory in every state for work above a set value, but cover is capped. In Queensland the scheme covers up to $200,000, or $300,000 with extra cover. On an $800,000 build, that may not cover the cost of finishing if the builder fails. Know your cap.
6. Who are your trades, and how long have they worked with you? Builders who keep the same trades for years are usually builders who pay on time. If subbies are turning over, ask why.
7. What happens if you’re delayed? Ask about current build times and how many jobs are behind schedule. A builder that is honest about delays is better than one that promises a date it can’t meet.
8. Who stands behind the business? A one-site operator, a national company and a franchised local builder each carry different risks. Ask what systems, buying power and support sit behind the person you are signing with.
Warning signs once you’ve signed
The QBCC lists the signs to watch: work stopping without explanation, site fencing removed, a website going offline, trades complaining they haven’t been paid, constant delays and poor communication. If you see two or three of these, get advice quickly. Keep copies of everything. If the builder goes into administration, contact the administrator straight away, because they may not know your contract exists.
A word to builders
Don’t take on work you can’t finish at the price you’ve quoted. In this market, revenue is not profit. A smaller builder that turns down a job is still in business next year.
Most builders do the right thing. But a falling market is when the weak ones are found out. Ask the questions now, before you sign, not after the site goes quiet.
This article is general information, not legal or financial advice. Get advice on your own contract.
Darren Wallis is Chairman of G.J. Gardner Homes and was its CEO and Managing Director from 2000 to 2020. He is a Fellow CPA, a Fellow of the Australian Institute of Company Directors and a founding director of Smith & Sons Renovations & Extensions and Total Fitouts.
Sources
- RBA, Financial Stability Review, October 2026, ch. 2
- ASIC insolvency statistics FY2025–26 (14,152 total; 3,472 construction)
- ABC News, “Australia has a housing shortage. So why are Bathla and other home builders collapsing?”, 8 September 2026
- QBCC, Understanding deposits and progress payments; QBCC builder insolvency consumer fact sheet
- Cotality Home Value Index, September 2026; RBA cash rate decision, 29 September 2026