One of the builders shortlisted to take up some uncompleted construction projects from the collapsed Porter Davis Homes Group (PDH Group) believes there was a "huge price difference" that some customers were offered for their homes compared to the rising costs of sourcing materials and tradespeople.
Bold Living director Brett Boulton tells Business News Australia his company has received at least 100 queries so far from Porter Davis customers wanting to complete their builds in Southeast Queensland.
"It’s a complete and utter mess with people at all various stages, the poor things," says Boulton.
"There are photos of frames coming through and the timber frame, it’s 90 per cent complete and they need a builder to take over, but firstly someone needs to pay to get the frame finished to get a roof on or the frame’s going to go bad in the weather.
"I sit here and think, 'far out', in Brisbane we’ve only got 200 of them under construction – down in Victoria there’s obviously 1,500, so you can only imagine the mess that someone's trying to assist with down there."
He explains Bold Living and Porter Davis are very similar in terms of the style of builds.
"So they were good competition to us. We’ve managed to pick up some of their staff as well. That’s obviously helped because there were some of these customers that were already signed up with their salespeople, and now those salespeople are employed by us," he says.
He notes the builder has hired four sales consultants, two draftspersons, two construction managers and one site supervisor from Porter Davis, although this is just a fraction of the 400 staff who were made redundant when Grant Thornton Australia's Said Jahani, Matt Byrnes and Cameron Crichton were appointed as administrators in late March, retaining a "skeleton crew" of 50 to 60 staff at the time.
"What we're doing is a very measured approach like we always have with business – we’ve not gone under contract with anyone at this stage, but anything that we will take on won’t affect our existing customer base," Boulton says, adding a lot of trades and suppliers have reached out to Bold Living as well to potentially help out.
"We know it's a long journey for these people in that they’ve got to go through the QBCC (Queensland Building and Construction Commission) and get insurance payments and things like that. It's a case of just working with them, and there’s also a huge pricing difference.
"Unfortunately that business went into liquidation for one reason or another, and what we're finding is there's a very large difference in terms of what their price is and what their price should be."
Boulton suspects that in some cases Porter Davis didn't use the price escalation clause as costs rose.
"From 2021 we were able to raise the price of a client that's on a fixed price contract if there were delays that were outside of the builder’s control, so the client delaying our process, which might be the land registered or they couldn’t get finance in time," he says.
"It seems like across the whole Porter Davis business none of that was done...prices got raised so rapidly throughout the last two years that they just haven’t been in front of it. We've been really ensuring that we’re priced correctly and we can actually complete these homes, and obviously not take on too many.
"We've been talking to people who are saying to us: 'We were quoting with Bold and at the time you were $50,000 dearer. We now understand why’."
Melbourne-based builder Long Island Homes is also on the shortlist and has received around 300 queries so far, which its team is still assessing.
"It's not like we're going to take on hundreds of jobs or anything. We are very conservative in what we do and that’s probably why we’re still in business," Long Island Homes managing director Craig Delaney tells Business News Australia.
"We could take on 40 or 50 jobs, however we’re a very responsible builder and we’re assessing everything on a case-by-case basis. We’ll definitely take on some work, there’s no doubt about that, because the type of houses had certain features that were similar to our features, so we have an understanding of that sort of construction.
"That’s a concern, because some builders people may go to outside the list might just build standard single-storey homes. You can talk about affordability, but at the end of the day, not all builders build the same."
Delaney says when the news broke he joined a discussion group to lend a hand.
"Consequently I got calls till two in the morning, I had people crying on the phone at midnight, I had people asking for advice on different building matters," he notes.
"I tried to help push people and give them counsel that this is a great time to take some legal advice, or this is a great time to look at the building contract under these clauses, or generally just try to be a voice there when there were no other voices, to at least give some comfort to some people who really didn’t understand what the next step was.
"The poor guys at GT were trying to get on their feet, they were trying to get into the process, there didn’t seem to be a lot of information coming out of what was going on at PD – so many people lost their jobs there, and it was a very traumatic time."
His comments around pricing echo those of Boulton, explaining that from 2020 onwards the Long Island Homes team would have to often explain to prospective customers prior to signing contracts that amidst rising costs, they'd need to agree to a new price that could be $40,000-$70,000 more expensive.
"We made tough calls," he says.
"Obviously, a lot of people at the time cancelled. We were seen to be not doing the right thing.
"At the end of the day clients believe that the cheapest price is the best in many circumstances, and it’s not the case because of everything that’s happened...we focus on what we do; we stay in our lane which is second and third home buyers, and higher end double-storey homes, knock-down rebuilds, things like that."
Delaney describes a "perfect storm" of several factors that have led to the challenges that have been evolving since even before the pandemic, although the COVID-triggered combination of the temporary visa workforce leaving the country and semi-retired builders and tradespeople retiring for good had an impact.
"Land was delayed in the process, approvals were delayed in the process, inspections from the government departments were delayed, delivery of land in many instances – you had a perfect storm," Delaney says.
He says there is still a lack of clarity about what the exact process needs to be for customers wanting to get their insurance payments from the Victorian Managed Insurance Authority (VMIA) while also getting on with finalising construction.
"The VMIA to their credit are under enormous pressure. In a situation like this it’s very easy to point the finger left, right and centre as to who’s to blame," he says.
"You need to step back and you need to look at the big picture, to get 1,700 claims dumped on you at one time, it’s an enormous burden, there's enormous stress on the machine, they're looking at policy I would imagine on the fly trying to do the very best job they can.
"You would think that common sense will prevail and that the client will get the right to choose the builder."
The Victorian Government has offered to compensate customers who were left without insurance due to the common practice of Porter Davis to file the insurance paper only once work had begun, which was in breach of the regulations. No such announcement has been made by the Queensland Government yet.
"We're just saying that these people need to go and get their own advice. But it's very difficult - they're getting conflicting advice to what we are," says Boulton.
"From when we sign a contract, we must take insurance out within a short window of time. But if they [Porter Davis] had cashflow issues I guess they probably weren’t paying the insurance for that reason.
"These poor people, if Porter Davis hadn't paid insurance, then they're potentially not covered," he adds.
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