Smaller developer Villawood was also using the group among its suite of builders. The developers all work with a range of builders across their sites and there is hope that some of these groups could take on the new contracts, according to several industry sources who spoke on the condition of anonymity.
Villawood Properties director Rory Costelloe said an unprecedented wave of new home building starts last year and this year coincided with a supply crunch in building materials, price increases, tight labour markets and rising interest rates.
House and land sales in Melbourne’s outer suburban estates normally average around 15,000 lots a year. However, in 2021 land sales nearly doubled as the Morrison government’s HomeBuilder grants kicked in and states offered first home buyers funding and stamp duty exemptions, to counter the economic impact of the pandemic.
“They’re all coming through as building starts in 2022 and 2023. Suppliers and subcontractors have all been ramping up their prices and now nobody can afford to deliver [on their building] contracts any more,” Costelloe said.
“Suppliers and subcontractors have to take some responsibility.”
Rory Costelloe, Villawood
“It’s a supply and demand issue. Suppliers and subcontractors have to take some responsibility and come back to realistic prices so that builders can deliver the contracts for the price they’re contracted for without making these big losses,” he said.
Lindsay Partridge, boss of Australia’s largest brick manufacturer Brickworks, which is owed more than $2 million by Porter Davis, said the government stimulus during the pandemic was “very effective as we’ve seen”.
Builders fell into one of two categories, he said. Those that kept their prices moving up, and there were others that tried to get large volumes of work, took on too much and are now struggling.
“Even the best builders worked for the last couple of years without much profit because of the scale of the cost increases,” Partridge said.
Brickworks managing director Lindsay Partridge.Credit:Louie Douvis
Partridge is expecting a “really short, sharp decline” in the coming year and then “hopefully we’ll see a recovery after that”.
“It’s not all bad news. It will give a chance for trade rates, and land prices and other things to come back and that might help affordability,” he said.
Costelloe said house and land sales were well down this year, “close to 8000”, which will hit subcontractors and builders hard. “There will be much less work to do next year,” he said.
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Lendlease is expected to be a small creditor to Porter Davis, having sold some plots for the builders’ display homes. Sources at Lendlease who were not permitted to speak on record said the group was still working through what impact the collapse of Porter Davis would have on customers.
A spokesperson for Lendlease said: “While we wait for formal advice from the liquidator on next steps, we’re working closely with our customers to determine the extent of any impacts and assist them to reach a solution as soon as possible.”
About 130 customers had purchased a contract from Lendlease in which they had stated their builder would be Porter Davis. The developer was working to identify other customers that had used a type of contract to purchase the land and chose Porter Davis as their builder. Lendlease’s total exposure is expected to be a fraction of the 3000 to 4000 homes the developer starts work on each year.
A spokesperson for Stockland said the developer was working with Grant Thornton, the liquidator of the companies within the Porter Davis Homes Group.
“We understand this is a difficult time for our customers and contractors, and we are committed to keeping them informed throughout the process, and as more information comes to hand.”
While the majority of Stockland’s customer will have engaged Porter Davis separately to build their homes, the developer also has some contracts with Porter Davis to build homes within its planned communities.
The developer is still assessing the number of customers affected by the collapse of Porter Davis and has contacted customers, according to sources familiar with Stockland’s discussions but not permitted to speak publicly. The developer was committed to completing the project, the sources said.
A spokesperson for Mirvac said the company was aware of the collapse of Porter Davis. “Whilst our exposure is minimal across a couple of projects, we are currently working through the impact to our customers who are at various stages of their builds, and have been in contact directly with all those affected,” the spokesperson said.
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