Victorian builder's collapse comes amid slow signs of sector recovery

While building approvals home loan commitments have had an uptick, it’s too little too late for yet another building company that has gone under.

Fifty Victorian homeowners and 200 creditors owed around $2 million are reeling from the demise of Chatham Homes, which went into voluntary liquidation on Monday (2 October).

The Melbourne-based construction company, River Dale Building Group that traded as Chatham Homes, also laid off 16 staff. The company was active throughout the Melbourne, Geelong, Surfcoast and Ballarat regions.

Andrew Schwarz from insolvency firm AS Advisory was appointed as the company's liquidator.

He attributed the company’s woes to “all the usual pressures; increasing costs, delays, supply constraints”.

Media reports have said the building firm did not take out insurance for a handful of customers, which means they are set to lose their deposits unless there is government intervention.

The collapse in March of major Victorian builder Porter Davis Homes sparked a major review into Victoria’s building regulations and prompted a government bailout package after a similar situation where hundreds of homeowners were left without insurance despite it being required under the law.

The scheme was widened to include any victims of a builder that had folded in the past 12 months and had not taken out insurance, ending 30 June.

That end-of-financial-year deadline will be of no comfort to those who had contracts with builders who failed from 1 July.

Nor will Australian Bureau of Statistics (ABS) data that on Tuesday (3 October) showed Victoria led the nation with a 22.2 per cent rise in total dwelling approvals in August.

The total number of dwellings approved rose 7.0 per cent in August, in seasonally adjusted terms, following a 7.4 per cent fall in July, according to the ABS.

Daniel Rossi, ABS’ Head of Construction Statistics, said, “Approvals for private sector houses rose by 5.8 per cent, following three months of stable movements.

“Approvals in the more volatile private sector dwellings excluding houses series rose by 9.4 per cent, following a 14.6 per cent fall in July.”

Total dwelling approvals were mixed overall, with rises recorded in Victoria (+22.2 per cent), New South Wales (+12.5 per cent), and Western Australia (+12.3 per cent). Meanwhile, falls were recorded in Queensland (-26.9 per cent), Tasmania (-10.1 per cent), and South Australia (-6.9 per cent).

Approvals for private sector houses rose in all states: Western Australia (+13.0 per cent), Victoria (+9.9 per cent), South Australia (+4.7 per cent), Queensland (+3.1 per cent), and New South Wales (+2.4 per cent).

Despite the generally improved data, Maree Kilroy, Senior Economist for Oxford Economics Australia, expects it will be years, not months, before dwelling commencements and lending volumes truly recover.

“We expect national dwelling commencements to slide below 150,000 this financial year.

“The mix of higher interest rates, delays and rising build costs have made it a challenging environment for new home buyers and developers alike.

“Underlying housing demand is receiving a boost from record migration and this is proving supportive to the established home market, evident in positive rent and price momentum.

“For new dwellings however, the relay of this will take a few years to play out.

“While movement is happening on the housing policy front, planning lags mean it will take until the back half of the decade to see an activity boost,” Ms Kilroy said.

Dual-speed market recovery

National home loan commitments (excluding refinancing) rose 2.2 per cent in August to $24.8 billion in seasonally adjusted terms.

Owner-occupier and investor lending both increased, up 2.6 per cent and 1.6 per cent respectively.

All states recorded growth in owner-occupier lending, with South Australia (+12.9 per cent), Western Australia (+4.9 per cent) and Victoria (+4 per cent) leading the gains.

Western Australia (+14.1 per cent) saw investor loans record the strongest result since 2015, while New South Wales (+1.3 per cent) and South Australia (+5.2 per cent) also contributed to the national improvement.

“National property price growth continued in September but there is a dual-speed recovery occurring evident in the average loan sizes,” Ms Kilroy said.

“Queensland, South Australia and Western Australia are showing the greatest resilience following successive cash rate lifts.

“We don’t expect lending volumes to truly accelerate until interest rate cuts kick through from late 2024, with first home buyers leading the charge.

“Demographic tailwinds for both upgraders and downsizers will support the next expansionary phase.”