While Sydney and Melbourne have been warned to brace for further falls in property values, demand for construction services remains buoyant, according to industry reports.
Moody’s Analytics predicts Melbourne values will drop by 11% in some parts of the city in 2019 and by 7% in Sydney’s Eastern Suburbs. Investment bank Morgan Stanley says home prices are falling at the fastest rate in 35 years and The Australian Financial Review reports building products’ share prices decreased by between 25% and 30% in the last months of 2018.
But according to the AFR, for now construction tradies catering to the private sector are still booked up into the year, with one Melbourne company crediting population growth and low interest rates for the continued demand for construction services. Specialist trades such as carpenters, tilers and cabinet makers are also in demand in most areas.
However, as Gallagher recently observed, construction industry insolvencies are part of a steadily increasing trend, accounting for nearly $3 billion in unpaid debts yearly. The flow-on effect of these insolvencies puts contractors, especially smaller companies, at risk.
Insurance can protect construction contractors and now is a good time to check that existing or due to be renewed policies cover the exposures they face with current market trends.
Some policies for tradies to consider include (but are not limited to)
- trade credit insurance safeguards against non-payment, enabling contracting businesses to pay employees and maintain relationships with customers and suppliers
- delay in start-up (DSU) insurance protects contractors from the financial effect of delay once the project has been delayed beyond its original operational deadline. It is also commonly a requirement of banks or other parties of equity or debt
- professional indemnity insurance is particularly important to contractors who provide a variety of services, enabling correction of issues during rather than after construction
- machinery breakdown and plant and equipment cover protect the contractor’s assets on site
- business interruption provides for additional increased costs of working, due to the need to relocate leased offices or hire additional equipment, for example.
Scope and terms of insurance cover should be matched to risks under design and construct (D&C) contracts. It helps to get broker input into wording and setting terms.
Talk to an expert
Gallagher’s construction specialist brokers have the expertise and industry knowledge to formulate insurance solutions to help contractors manage their risk exposures.