Construction sector faces rising number of liquidations as business credit defaults also climb across the industry according to credit bureau Centrix

Credit bureau Centrix says construction firms currently represent one out of four companies being placed into liquidation and 546 construction firms have been liquidated in the past 12 months.

The latest monthly credit indicator report from Centrix found business credit defaults have risen by 5% across all industries.

The transport and construction industries are being hit particularly hard with business credit defaults soaring 25% and 22% year-on-year respectively.

“Non-residential building construction firms are experiencing the highest annual increase in liquidations, up 78% from last year,” Centrix managing director Keith McLaughlin says.

Construction companies represent 12% or 84,000 of all registered companies across NZ, with 26% of liquidations across all sectors coming from the construction industry.

Centrix says companies in the construction industry are more than twice as likely to fail than the average NZ business.

The September credit indicator report found the number of consumers behind on their payments has risen 5,000 from a month prior to 461,000 people. This equates to 12.3% of the “credit active” population.

Higher levels

Centrix says approved new mortgage lending is up 7.8% in the August quarter compared to the same period last year, but it’s still 32% lower than the same period in 2021 during the property market boom. 

McLaughlin says small businesses in particular have been facing higher levels of mortgage stress in the last two years.

“... sole proprietors who own two or more businesses [are] experiencing more than double the level of debt stress compared to non-business owners,” he says.

According to Centrix’s monthly report mortgage delinquencies, which occur when borrowers are late or behind with their mortgage payments, improved slightly in the month of August and were down 300 from July, with 20,700 home loans reported as past due. 

This 20,700 figure is still 12% higher year-on-year.

Mortgage demand remains subdued and new home loan application enquiries were up just 0.2% year-on-year in August.

McLaughlin says new credit card application enquiries have risen to their highest level since November 2021, which suggests consumers are seeking out alternative methods to handle their payments.

The September credit indicator report found financial hardship cases have risen 24% year-on-year which Centrix says reflects the current difficult economic environment. 

Financial hardship cases have been rising since November 2022.

There are currently 280,000 consumers holding a personal loan according to Centrix, and of that 280,000 there are over 45,000 borrowers holding multiple personal loans.

Centrix says there have been 138,000 new personal loan accounts opened in the last 12 months, which is 18% lower on the prior year.

The average borrowing amount is sitting at $14,800 per active account – $3,000 higher since the beginning of 2021.

Seasonal trends

Centrix says the level of arrears (overdue debt) for consumers is 6% higher compared to a year earlier and is tracking just above 2018 levels after coming off historic lows. 

In line with seasonal trends, Centrix expects arrears to rise further during the late spring and early summer period, although the number of consumers who are over 30 days in arrears has improved by 2% year-on-year. 

While credit card arrears increased 0.2% to 4.4% in August on an annual basis, vehicle loan arrears were sitting at 5.9% in August and were unchanged year-on-year.

Centrix says the percentage of telco/communication accounts that were past due payments fell below 10% for the first time in August since November 2023 – but only to 9.6%. A year ago, the percentage of accounts behind on telco payments was 8%.

The amount of households behind on retail energy payments rose just 0.1% to 4.7% in August on a yearly basis, as households faced higher power costs over the final weeks of winter.