As China Evergrande and a host of other major Asian property developers continue to grapple with extraordinary debt, there are now signs the property crisis has spread further across the Asia Pacific region, reported by asiamarkets.com
One of Australia’s largest construction and development companies, WBHO Australia Pty Ltd (along with 18 of its subsidiary companies) has plunged into administration.
WBHO Australia was effectively forced into administration after Wilson Bayly Holmes-Ovcon Limited announced it would no longer finance the Australian operations due to concerns about the industry.
“The Australian construction environment has also become increasingly competitive and contractual, in our view, the potential risk on large mega-building projects outweighs the current margins available,” it said in a statement.
The statement goes on to criticise Australia’s “hard-line” approach to managing COVID-19.
“The Australian government’s hard-line approach of managing Covid-19 through a combination of border restrictions, snap lockdowns and mandatory work-from-home regulations for many sectors, has had a considerable impact on property markets as well as other industries such as the leisure industry.
“Border restrictions have resulted in hundreds of thousands of foreign students, tourists and investors unable to gain entry to the country. Population levels in the two major cities of Melbourne and Sydney have shown negative growth as a result.
“The impact of lockdown restrictions on the retail, hotel and leisure and commercial office sectors of building markets have created high levels of business uncertainty in Australia and have significantly reduced demand and delayed the award of new projects in these key sectors of the construction industry.”
Deloitte has been appointed administrator of the group and will now have the task of sorting through its debt burdens which industry experts believe could run into the billions.
Reports are emerging from Australia detailing how workers at WBHO Australia’s largest subsidiary, construction giant, Probuild, have been abruptly ordered to leave work sites and told they no longer have jobs.
Probuild has numerous high-profile contracts worth billions with major Australian corporates and the Australian Government.
It’s estimated around 5000 employees – direct and indirect – could be impacted.
Jason Yat-Sen Li, CEO of leading corporate advisory firm Yatsen Associates, said the collapse demonstrated a “broken industry”.
“The Probuild collapse hurts a lot of innocent people including workers, sub-contractors & consumers,” said Li.
“Builder margins now less than 2-3% (is) unsustainable for big projects. This shows a broken industry structure where developers making the dollars don’t necessarily carry the most risk or accountability.”
WBHO Australia’s parent company is Johannesburg-listed builder Wilson Bayly Holmes-Ovcon Limited (JSE: WBO). It’s share price has plunged 27% since the announcement.
WBHO Australia reported revenue of A$1.4 billion in 2021 and had current liabilities worth A$401 million.
