The collapse of a bathroom products manufacturer in Victoria has highlighted just how difficult the current economic environment is for construction providers, with one expert saying businesses will now have to prepare and learn how to deal with more subdued activity than they are used to.
The warning comes despite new official statistics showing a slight rise in housing starts recorded during the March quarter – experts say the year-on-year results paint a different picture.
Ryluc Industries, which manufactures bathroom furnishings including sinks, cabinets, laundry cabinets and other furniture, has entered voluntary liquidation.
Grant Thornton is acting as liquidator, but representatives were not available for comment before publication this morning.
Attempts to contact Ryluc were unsuccessful. It is not clear whether the business is still trading.
The collapse came on the same day that new figures from the Australian Bureau of Statistics showed housing starts rose by a seasonally adjusted 3.1% in the March quarter – a result widely expected by economists.
However, building experts point out the industry is still suffering – starts are over 12% below the same point they were at last year, and private sector starts are down by a massive 18.2% over the 12 months.
Property experts have often pointed to Victoria as one of the havens of the property market right now, with apartment construction ramping up. Combined with fewer buyers, more listings and higher interest rates, experts say downward pressure on prices will make housing more affordable in the short- to medium-term.
However, Master Builders Association of Victoria executive director Brian Welch says businesses are still struggling to cope after dealing with a boom for the past decade.
“The fact is that Victoria has seen strong economic circumstances in above-average building and construction activity. The industry has traditionally seen cycles of seven years, between very good times, boom times and downward cycles.”
“But we’ve missed a cycle, so for 15 years we’ve had good times, and the new 10-year rolling average for business starts for housing has increased significantly along with our population growth.”
The collapse of Ryluc also comes after the Queensland Government pledged earlier this week to give new home buyers $10,000 for a dwelling purchased for under $600,000 in a bid to kick-start the state’s dwindling property market.
However, while Queensland has been affected by natural disasters, Welch says the same macro-economic factors keeping building and construction down can affect Victorian companies as well – this is a national problem, he argues.
“We’re punching above on the eastern seaboard here. We’ve had declines here, although many aren’t necessarily to do with macro-economic circumstances, but more to do with things like planning systems, which have led to rapid and unsustainable price increases in land.”
“Putting it into perspective, consumer confidence and the macro-economic effects of interest rates certainly do have an effect, but I think we have the opportunity to mitigate that in Victoria.”
Welch says businesses are now having to deal with a downturn when they haven’t experienced one in the past 10 years.
“The worst part about a decline in activity is that businesses haven’t known this for 15 years. They’re going to have to rely on their memory, and for those people that have never experienced a cyclical decline, they’re going to have to learn some hard lessons.”
Cashflow, managing debtors and marketing for business are just a few of the problems these new companies will have to face, he says.
“I have a concern about builders, sub-contractors and manufacturers. They need to review their management structures and take the new environment into account – they can’t just rely on continual growth.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
