One of Australia’s largest home builders Porter Davis has collapsed and construction firm Lloyd Group has gone into voluntary administration in a hit to the sector.
Grant Thornton Partners confirmed it had been appointed liquidators of the Porter Davis Homes Group, covering 14 companies.
Englehart Homes is the only company in the group that is not subject to the liquidation.
Works on current builds will stop immediately although liquidators are working to find a solution to support customers and some employees, Grant Thornton said.
Porter Davis has more than 1,500 homes in progress across Victoria and 200 properties in Queensland, while a further 779 customers have signed contracts where building is yet to begin.
Rising input costs, supply chain delays, labour shortages and dropping demand contributed to Porter Davis’s collapse, the liquidators said.
“Notwithstanding the financial support from shareholders and lenders, the group has exhausted options to secure the further funding required to allow Porter Davis to continue to operate viably,” Grant Thornton said in a statement.
“The directors were left with no option but to place the companies into liquidation.
The Porter Davis board of directors said it regretted the current circumstances but were hopeful a solution could be found to support Porter Davis customers in completing their homes.
It also acknowledged the group’s 370 employees for their hard work and commitment to Porter Davis.
Lloyd Group has also gone into voluntary administration, Deloitte confirmed on Friday.
The company specialises in the design and construction of building and infrastructure projects for state and local government, primarily in Victoria and NSW.
The process will affect 59 projects under construction – 29 in Victoria and 30 in NSW.
“We do appreciate that this news will be unsettling and potentially disruptive for employees and project stakeholders, contractors and suppliers,” Deloitte restructuring partner and voluntary administrator Sam Marsden said.
“In these early days, we will be undertaking an urgent assessment of the business’s financial position and project-by-project status, and immediately commence communication with project principals and stakeholders.”
The business has about 200 employees.
Marsden said the sector had faced increasingly challenging circumstances in recent months that had eroded project margins.
One of those affected customers is Melbourne mother Katharyn Borg, who put down a deposit to build her dream home on Queensland’s Bribie Island.
Borg and husband Simon were awaiting their first tender from Porter Davis when the news came through on Friday.
“We’re definitely not in the worst position but it’s still devastating,” she said.
“We thought we had locked in our dream home.”
Borg said she had already contacted another builder but was worried about the next steps.
“Porter Davis, to me, was a massive company. So many people would have never thought they would go into liquidation,” she said.
“Is there any guarantee for this home build now? It’s just another level of stress.”
Victoria’s opposition spokesperson for home ownership, Jess Wilson, said the Porter Davis closure was a huge blow to housing affordability, and blamed the state government’s pipeline of infrastructure and public transport projects – known as the Big Build.
“The Andrews Labor government’s major projects Big Build is pushing other housing and construction businesses out of the market – meaning fewer homes at higher prices for everyday Victorians,” she said in a statement.
However, Matthew Kandelaars, chief executive of the Urban Development Institute of Australia’s (UDIA) Victorian branch, said there were several domestic and global factors to blame.
“There is no one particular factor that anyone can point to – it’s an industry wide issue. It’s an issue beyond Victoria. It’s almost a perfect storm right now,” he told Guardian Australia.
Kandelaars pointed to the federal government’s pandemic-era HomeBuilder program, which saw a surge in demand at the same time costs for materials and labour surged. In Victoria, fewer than 10,000 grants were forecast at a cost of less than $250m but more than three times that number were approved, costing more than $700m.
“Most of these would be fixed-price contracts, which would have eroded builders’ margins and would have been a struggle to complete,” Kandelaars said.
“Most builders would now be expect to be rolling into new contracts which have been priced accordingly, but because of the dramatic falling consumer sentiment and demand, that’s not what has been happening.”
Kandelaars suggested delaying the commencement of changes to the national construction code, set to come into effect later this year, to help protect builders.
From October, all new Australian homes will be required to achieve a seven-star energy efficiency rating and meet new accessibility standards, including step-free entries and easy access bathrooms.
The UDIA and the Master Builders Association have said the changes could add time and cost to projects and have called for its implementation to be delayed.
A Victorian government spokesperson said they understood the “pressure on builders due to labour and supply chain issues” and continue to consult with the industry.
“This is a hard day for the construction sector and our thoughts are with impacted workers, suppliers and customers,” they said.
It’s understood Porter Davis has no contracts with Homes Victoria, which is overseeing the state’s Big Housing Build, though group had been contracted to renovate four schools.