Government must have eye to buyers, builders in property collapse

The sudden collapse of the Porter Davis home building group could reverberate for years. The company stopped work abruptly on Friday, leaving some 1700 properties in various states of completion, the vast majority in Victoria, and is now in the hands of liquidators Grant Thornton Australia.

Anxious customers are understandably impatient to find out what happens next to their unfinished dream homes, but for most a swift resolution appears highly unlikely. Instead, we are all about to find out in real time how much protection trusting home buyers are actually afforded by consumer law, how difficult it is to access in practice and what avenues there are for recourse.

There are potentially wider implications, too, if would-be buyers are spooked into deferring or cancelling future builds, putting more financial pressure on companies already struggling with soaring prices for materials, pandemic pipeline issues and the recent rise in borrowing costs.

The state government is probably right in ruling out any form of bailout, which Premier Daniel Andrews appeared to confirm on Sunday; taxpayers should not be automatically on the hook for the failings of a private business.

But neither should government just turn a blind eye to the whole episode. The social costs here are significant: 410 direct jobs lost, many more subcontractors and suppliers out of pocket, a large group of home buyers potentially facing financial hardship and certainly weighing heavily on an already tight rental market while they assess their options.

A Porter Davis display home at Mickleham on Sunday.Credit:Luis Ascui

Indeed, both state and federal governments should take a long, hard look at why the firm collapsed and whether some form of earlier intervention could have saved it and its customers.

For the 12th largest home builder in the country to suddenly go belly up may yet prove an anomaly – or it could speak to a wider malaise.

Were warning signs ignored? Were regulatory oversights adequate? What can, or should, be done if an even bigger operation begins to struggle, which many are already suggesting is very possible in the current environment?

Critically, is the current safety net for consumers – mandatory domestic building insurance – adequate and offered fairly? Some of those affected have already lodged claims with the state-backed Victorian Managed Insurance Authority. But as payouts are capped, some buyers will find themselves substantially out of pocket.

The fine print determining what can be claimed is, as always, bewildering. And there are fears the assessment process will take months, even years, leaving projects which range from just-poured concrete slabs to almost-finished homes that are yet to be granted an occupancy permit to simply languish. If the system is deemed to not have worked as it should, then the government should be prepared to yet again contemplate reform.

The stranded home buyers will learn a little more of their predicament on Tuesday after a forum with liquidator Grant Thorton. In particular, they will hear what hope, if any, remains of other firms taking over unfinished projects in the near future; where they stand as creditors; and whether they can tear up the Porter Davis contract and hire another builder in the unlikely event one is available.

They will almost certainly remain in limbo for the foreseeable future, through no fault of their own. Whatever assistance the government can offer, particularly in speeding up the insurance process, it should. For this is a crisis that cannot be allowed to endure any longer than necessary, nor, if it is in any way avoidable, should it be allowed to be repeated.

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