WA Premier Mark McGowan reacted to the collapse of major construction companies as businesses go bankrupt and people are left behind.
Two builders have gone into administration in Western Australia leaving many behind after securing government grants for their builds, but Prime Minister Mark McGowan insists he will make the same appeal again RELAUNCH.
Many construction companies are feeling pressured to deal with rising material costs and the current shortage of workers, with New Sensation Homes and Home Innovation Builders having recently gone into liquidation.
There are fears other builders will follow, but Mr McGowan says there is little his government can do to help.
Asked if he expected more companies to go bankrupt, the Prime Minister replied: “I don’t want to denigrate the industry like that.”
But Mr McGowan insisted he had no regrets about the stimulus package, noting that in May 2020 the entire industry of around 70,000 people was “in mortal danger and that there was a valley of death in which everyone was sacked” and that companies would go bankrupt.
He said this led to the Commonwealth offering grants of $20,000 and the state providing $25,000 per house built.
“We started the industry and we did what we had to do in the circumstances we faced,” he said.
“If I had the exact same situation again, I would do the exact same thing again.”
Mr McGowan said he would consider what could be done for those left behind, but said it was “very difficult for the state to intervene” in individual situations.
“We have so many houses under construction, we have so many new contracts that have been signed… they have no provision for cost escalation, and then we have the war in Ukraine (and) we have had difficulties supply chain worldwide,” he said.
“These kinds of things have an impact on manufacturers. Now, for individual builders in their individual home purchase contracts, I just urge both parties to work together and negotiate so they can get their home built.
“The state can’t do much about these individual contracts.”
Mr McGowan said his government would continue to ensure the success of builders.
“With the labor shortages…obviously we’re launching campaigns all over Australia and we’ll do it all over the world to get the people we need,” he said.
“We also recently passed automatic mutual recognition legislation, which means someone trained in a trade or professional in another state can just come and work here without restrictions.
“So we’re doing everything we can to try to address some of these issues that the industry is facing. Some of them are long term.
The Prime Minister’s comments are cold comfort for *Mary, who was already going through a stressful building process with New Sensation Homes, only for the company to go bankrupt.
Mary told NCA NewsWire she was referred to the builder through her broker.
“At that time, the reviews were excellent. There were no bad reviews for them,” she said.
“I was like, really nervous, because I’d never done this before…everything looked great and the salesman was good.”
Mary signed a contract in December 2020, but the following March she was slapped with a $10,000 price increase.
Shortly after, he was told his slab was going to cost an extra $1,000.
“I started to worry at that point, thinking something was wrong,” she said.
“I go through pre-departure and I just think, is this all going to happen?”
Mary said that before the slab was laid, she was hit with another $11,000 price increase in June 2021.
She said she was told this would be the last price increase and her house would be ready by January 2022.
The slab fell in July 2021, which allowed him to access government grants, but nothing happened afterwards.
Mary was then told the company needed to source bricks from elsewhere, then switched suppliers again a few weeks later.
She said she started to panic and felt the business was “going to go under”.
In December, she was told she had to pay all the change fees, which totaled $37,000.
Mary said she was told the builder would take legal action against her to recover the amount owed to the company if she did not pay them.
“I said OK, I’m going to pay in good faith that you’re going to finish my house,” she said.
In January, the bricks finally started going up but the project stalled again.
“Last week I emailed the guy and got an out of office reply. It said ‘our office is closed due to Covid’,” she said.
“It was probably a day before the news that they were in liquidation.”
Mary said she would try to refinance and find a way to get her house built, but she wasn’t sure she would succeed.
She said she wasn’t sure the home insurance would be enough to finish her house.
“It’s all in the air. It’s just a nightmare,” she said.
Tiarna Nouwland launched a online petition calling for an update to builders’ liability insurance to protect new construction and home improvement customers, with more than 800 signatures to date.
“With two builders going into liquidation within days of each other, and many more on the brink of bankruptcy due to untimely government subsidies, the Covid-19 pandemic and soaring material and labor costs government must step in and fix the policy they started,” she wrote.
“Current WA-regulated QBE builders indemnity insurance is capped at a maximum payout of $100,000, less an excess of $500.
“But with building costs soaring in today’s inflated construction market, that means customers are facing hundreds of thousands of dollars out of pocket (with) the inability to complete their home in which they invested their savings.
On the other hand, Perth has been at odds with most of the country as established house prices continue to rise.
House values in Perth have increased by 21.6% since March 2020, with sales activity up 56%, while the median time to sell a property has fallen from 43 to 14 days.
Real Estate Institute of WA chairman Damian Collins said Perth’s property market had seen a remarkable turnaround in the past two years since the pandemic began.
“At the time, some commentators and financial institutions predicted a 20% drop in prices. Fortunately, the downturn was short-lived and only small,” he said.
After the first lockdown, people started taking advantage of WA’s affordable housing and low interest rates, Mr Collins said.
Data from REIWA revealed that there were just 7,796 properties for sale in Perth at the end of March, compared to 12,295 at the same time in 2020, a drop of 37%.
“The pandemic has seen a return to net interstate migration to WA, which has certainly exacerbated the housing shortage in Perth, with far fewer properties available for sale than two years ago,” Mr Collins said. .
“As the borders open, we hope more skilled workers will be attracted to the state to help complete construction and create new housing.
“We don’t expect market conditions to slow down any time soon, with further price growth of 10% expected in calendar year 2022.”
However, other experts have warned that WA may not see such an influx of workers as other cities across Australia and around the world are also pumping money into their economies.
*Marie is not her real name