Work has stopped on about 130 residential home building sites as Perth builder BuiltonCorp is placed into voluntary administration.
Administrators Con Cordis have announced the company owes about $16 million to 350 unsecured creditors, mostly subcontractors.
They also said 38 jobs at the company had been axed, and a priority would be to return any unpaid entitlements to those workers.
The administrators were also appointed to Builton Group, Builton Property Holdings and Aspireon Homes.
"As we were only appointed yesterday, we are still in the process of investigating the companies' financial positions, but what is clear is that the companies are unable to continue to trade," Cor Cordis partner Dino Travaglini said.
Mr Travaglini said it appeared most of the losses had come from the company's commercial building operations.
BuiltonCorp Pty Ltd had a turnover last financial year of $80 million.
WA building industry 'on its knees'
Owner of Anstey Cabinets Dennis te Wierik told ABC Radio Perth the move would immediately result in a 50 to 70 per cent drop in his work turnover.
"It means that last week I had to let six people go pretty much instantly. Awful, awful. It's not always about the amount of money you are going to lose, it's also about the impact that it has on you," he said.
"I'm disappointed that I was led astray and was assured things were OK."
Mr te Wierik said the building industry in Western Australia was struggling.
"The building industry in WA isn't well ... it is on its knees," he said.
On Monday, Commsec's State of the States report ranked WA in last place on eight indicators including economic growth and housing.
WA Building Commissioner Peter Gow said the housing industry had come down from a peak of about 30,000 starts per year three years ago, to less than 20,000 now.
"That's putting more pressure on builders, their subcontractors and suppliers than usual," he said.
"We think there is a greater chance of insolvency in the industry generally."
Mark Kelly is building a "downsize" home with Platinum Homes, a company which is part of the BuiltonCorp group, and is worried about securing a high-quality replacement builder.
"We want to have a quality built home. We are obviously not sure what is going to happen at this point," he said.
The Building Commission issued a warning about BuiltonCorp on Friday after receiving notification from the company that it would likely be placed into voluntary administration.
Hopes insurance will cover homeowners
Mr Gow believes most affected BuiltonCorp home owners will be covered by home indemnity insurance.
"Typically the insurance will cover it, and QBE will work with the home owners to identity a potential builder ... then the insurance will cover the difference in cost between what it would have cost had there been no insolvency and the final cost of completing the build," he said.
"There is always a possibility that the administrators may be in a position to finish off some contracts particularly those that are close to completion."
Mr Gow said for multi-unit developments, deposits should be able to be recovered from a trust account.
"It will be very much up to the administrators to find a way to complete the projects," he said.
The company has not answered its office phone number or responded to inquiries by the ABC.
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