Residential construction companies in Australia are experiencing a wave of collapses, leaving depositors and home buyers in a dire financial situation. 

Over 2,000 construction companies have gone into liquidation since mid-2021, with prominent names like Dyldam Developments and Porter Davis Homes Group among the casualties. 

These collapses have put thousands of projects at risk and resulted in billions of dollars of losses. The Australian Securities and Investments Commission (ASIC) has been criticised for its lack of action and enforcement against fraudulent activities in the industry.

Multiple factors have contributed to the industry's downfall. COVID-19 shutdowns, adverse weather conditions, supply chain issues, competition from infrastructure companies, reduced first home builder stimulus packages, and the end of easy credit have created a perfect storm for the residential construction sector. 

Rising material costs and labour shortages have also strained builders financially, while declining house prices and reduced demand have further added to the industry's woes.

The collapse of numerous construction companies has had severe consequences. Consumers are hesitant to build new houses due to the risk of construction delays and builder insolvency. 

Suppliers have tightened payment terms, exacerbating builders' financial strain. 

The reduction in housing stock has contributed to a rental crisis, with rents rising and calls for rent freezes gaining traction.

Depositors and home buyers affected by company collapses have limited recourse. They often face significant financial losses and struggle to find alternative builders to complete their projects. Home warranty insurance provides minimal protection, and expensive legal action is typically required to seek compensation.

Recognising the need for better consumer protection, Associate Professor Rob Nicholls of UNSW Business School is leading research to propose a regulatory framework that minimises risks for buyers and builders. 

The aim is to learn from financial and professional service regulations and develop effective measures to reduce systemic and systematic risk in residential construction.

The challenges faced by Australia's residential construction industry raise concerns about the future of home ownership in the country. 

With the shortage of new homes projected to worsen in the coming years, urgent action is needed to address the industry's issues and protect the interests of depositors and home buyers.