Rising insolvencies and tax debt defaults are putting 1.2 million homes target further out of reach
Australia's construction sector may be in worse financial health than headline economic data suggests, according to Brad Walters (pictured), general manager of Equifax Australia.
The latest credit and insolvency data from Equifax points to severe cash-flow distress – and potential consequences for the nation's housing supply pipeline – that top-line figures are failing to capture.
In a discussion with MPA, Walters drew a contrast between official Australian Bureau of Statistics (ABS) construction data and the on-the-ground picture emerging from Equifax’s own research.
“Top-line numbers may be masking severe distress and cash flow bottlenecks at the lower end of the market,” said Walters.
The latest ABS data for the March 2026 quarter showed a 2.2% increase in construction sales and a 7.9% jump in company gross operating profits. In isolation, these figures project an industry in reasonable shape.
Earlier ABS data for the December 2025 quarter also showed building work done rose 0.9% in seasonally adjusted terms, with residential building up 1% and non-residential up 0.7% year on year.
What the headline numbers don't show
However, Equifax's granular credit data tells a different story – one with direct implications for brokers working with property developer and construction clients, and for broader expectations about housing delivery.
According to Walters, new tax debt default disclosures for construction businesses spiked 49% in the first quarter of 2026, and sector trade payment delays worsened over the same period.
Construction business exits were 10% higher year on year. While company insolvencies recorded a modest improvement – 6.4% lower than 2025 levels – they remain at elevated levels, and business-related personal insolvencies continued climbing.
A notable trend for brokers is the contraction in credit demand from smaller players. Business credit demand from smaller construction businesses fell 5.6% compared to the prior year.
On this note, Walters said: "With traditional credit demand falling, and tax debt crackdowns forcing disclosures, distressed construction businesses will likely face tighter lending conditions, potentially forcing them to seek alternative or more expensive secondary financing to bridge the worsening trade payment delays. We have seen growing levels of credit shopping behaviour across smaller businesses."
Buyer confidence and the trust premium
The financial pressures in the construction sector are also weighing on homebuyer confidence in ways that have direct relevance for brokers advising clients on new builds and off-the-plan purchases.
Equifax's iCIRT (Independent Construction Industry Rating Tool) Consumer Survey, conducted in 2025, found that more than half of Australians who intend to buy, build, or renovate in the next five years are more concerned about a builder going bust before completing a project than they were a year earlier.
Walters noted that since that survey was conducted, construction insolvencies have only risen further.
A concrete "trust premium" is also emerging: three quarters of those looking to buy, build, or renovate over the next five years say they would pay more for a rated and reliable property developer or building professional. Concurrently, an increasing number of customers are using independent rating tools like the iCIRT (Independent Construction Industry Rating Tool) register to weigh their options.
"While 22% of constructors seeking an independent rating have not yet been able to meet the required standard to obtain this credential, there is a growing cohort of rated and trustworthy constructors,” noted Walters.
Impact on housing targets
The financial distress rippling through Australia's construction sector lands at a particularly fraught moment for the federal government's housing ambitions.
Labor's National Housing Accord has set a target of 1.2 million new homes by 2029 – a pipeline target that is becoming increasingly unlikely. Total dwelling approvals fell 3.4% in April, according to ABS data, the latest sign that the sector is struggling to build momentum.
Although approvals have strengthened compared to a year ago, Cameron Kusher, chief economist at property valuation firm Herron Todd White, reckons these levels remain insufficient to meet Australia's housing needs.
"The barriers facing the housing sector extend beyond demand and financing. Construction costs remain elevated, labour shortages persist, and feasibility remains challenging for many higher-density projects, particularly in major capital cities,” said Kusher.
Construction insolvencies will only pile more pressure onto these challenges. Every builder that exits the market removes capacity from an already-strained pipeline – a dynamic that sits uncomfortably alongside Equifax's findings of a 10% year-on-year rise in construction business exits.
Kusher warned that even if approvals continue to rise, "it will take several years for additional housing stock to be delivered and materially improve affordability outcomes and ease pressure in rental markets”.
