Theres no way you would risk it in the current climate.. Some of these companies going toes up are massive… if they are losing it, how about the small company - how do they survive.
https://www.theage.com.au/business/companies/home-builder-po…
Porter Davis has more than 1500 homes in progress in Victoria and a further 200 homes in Queensland. There are also 779 signed contracts with customers where building has yet to commence,
volume builders also seem to go into liquidation to clear debts and then sprout up new businesses everywhere
Great news, we have managed to move your build to a new builder called "Davis Porter", you will retain all the same contacts as before, there will be additional costs though.
My sister's builder did this "You get to keep your deposit but only if you build with this new builder who cost $100k more than your original contract"
She rightly changed builders completely but its such a scam
And then a few months later, Dorter Pavis
…then Paver Snorter
Little guys find it easier to declare bankruptcy. You just don't hear about the builder who went under with 4 homes in construction because it isn't worthwhile news.
I don't get it . Why don't people simply buy existing building that are stronger than the Lego crap they build nowadays and not run into these problems?
Agree… you also get a place with good sized rooms !
Cause… demand is much bigger than supply?
Most new houses that Porter Davis are building have much bigger rooms.
Perhaps use the past tense?
That seems to be one of the causes, and Porter Davis didn't see it coming.
Should have came here for Specsaver deals!
They want new and shiny :(
I don't get it
Have you heard about the Housing crisis
Some are doing demolish and rebuild thingy and get better energy rating.
But I agree with your sentiment. Too risky in the current situation to start new.
Have you ever lived in the average old house that is still standing? They were built terribly, they got too hot in the summer and too cold in the winter. And it's not that they aren't insulated, they are just insulated improperly so they trap heat when it's hot. The way we used to build houses was a joke, basically that scene from They're a Weird Mob where the Italian guy gives himself heat stroke chopping up roots on a lot of land for a house being built.
Yes, a lot of houses built last century do not have proper insulation installed. It is possible to retrofit insulation but can be costly (eg, blowing in wall insulation) and sometimes has its own problems (eg, moisture infiltration as no air gap). A lot of the older designs are not "green", (eg not taking advantage of sun angles in Winter) but also have other problems such as old wiring. Some do not have dampcoursing so risk rising damp and/or have clay sewer pipes so run the risk of root infiltration - the list goes on.
I'm not above criticising the build quality of old houses, but we sometimes forget what the environment was like when it was built. A lot of those would have been on larger blocks of land, probably with a few trees on the block, with few neighbouring buildings, etc.
Our fixation in sub-dividing blocks, cutting down trees, altering water courses, concreting areas of vegetation, etc., all contribute to a change in our immediate environment.
Yeah, the older brick/stone homes (e.g. federation era) I've lived in have been pretty good. Lots of shade and stuff from old trees helps a lot there. Also they aren't getting really hot from facing the sun in the afternoon like the newer places I've lived in (especially townhouses).
Wtf are you on about? It's not a fixation. It's the only reasonable solution. How do you propose we fit more people on the same land and minimise urban sprawl?
I live in one now. It's 80-someting years old. I insulated it and planted trees. Dramatic, I know!
It'll outlast any of the new buildings being thrown up on the development next door. Actually, if it burned to the ground today it'd still outlast the new shit.
from following RE markets, there seems to be a huge divide between three groups
The distinction between groups 1 and 3 is enormous; those who love white waterfall kitchen island benches and charcoal carpets will never cross the threshold of a house with a timber benchtop and off white carpet in the bedroom. I've seen people express revulsion at the thought of living in a home where someone else may have lived and breathed and shat.
Certainly in today's building climate, if you have a new or a fairly freshly renovated house then you can charge a premium price
I've seen people express revulsion at the thought of living in a home where someone else may have lived and breathed and shat.
Yes, I've seen this too!
Funny thing is that the same people have no issue renting non brand new house.
Volume builders tend to also do a lot of development projects, buying up the land to sell (with their buildings). Sounds like they have been caught out with liquidity, having not paid subcontractors for a few months.
Porter Davis’s board said they regretted they could not find a funding solution for the group
…rising input costs, supply chain delays, labour shortages, and a drop in demand for new homes in 2023 impacting the Group’s liquidity…
It's a vicious circle.
More bankrupcy news = drop in demand = less cash = can't pay bill = even more supply chain delays = ???
Seems like everyone is over leveraged in the hopes of making as much money as possible from the housing gods, even the builders. Property investment is a national madness.
A contract in the hand is better than two in the bush. Until it blows your arm off!
It's a mental illness, everyone thinks they can "get rich quick" through property. Little do they understand the main reasons property has boomed the past three decades is because interest rates have gone down steadily and immigration has boosted our population. That's it. Take those two things away and shares have done way better over the past 100 years.
When you scale up to take advantage of the free $25k grants being handed out by the government only to realise once the tap is turned off you don't have the continuous supply of cheap money - basically a sound business model that turned into a ponzi scheme when builders get greedy,.
1. Get buyer to pay deposit
2. Use deposit to pay subcontractors for other buyer's build.
3. Hope that there's another deposit to pay for the next guys build.
4. Repeat and hope the hell prices don't go up.
Funniest thing is Finance is part of the units required to complete building qualification.
HIA has economic forecast updates. They probably discussed the breakfast after more than the content of the presentation.
I don't understand. There are 6months wait list with builders to build new homes, basically they are in demand so how they suddenly goes into bankruptcy?
I don't think it is sudden; they haven't paid some subcontractors for months.
The reasons are stated in the article.
What usually happens is they borrow as much money as they can on the basis of their business growing at a steady rate to pay off that debt. When that projected growth doesn't happen for whatever reason then they can't pay off that debt and they can't borrow more because they already borrowed as much as they can. Leaving them with literally no other choice than to go bankrupt.
“The extremely challenging environment for residential home building has directly contributed to the PDH Group’s (trading as Porter Davis) financial position, with rising input costs, supply chain delays, labour shortages, and a drop in demand for new homes in 2023 impacting the Group’s liquidity,” Grant Thornton said.
If they had accounted for these "challenges" then they would still be in business. They wouldn't have overextended themselves which means they wouldn't have grown as much as they could have, but they could look back and say "gee whiz, it's a good thing we didn't borrow so much or else we'd have to sell all the business assets just to pay off as many of our creditors as we can". You have to spend money to make money but they spent too much!
To be fair to them and any other business, sometimes saying "if they had accounted for these challenges" are easier said than done.
The number of building companies that collapsed in recent times clearly would be attributed to more than just not "accounted for these 'challenges'".
Metricon was barely surviving if it wasn't because of the brand and that's probably one of the most recognizable building brand in Victoria.
If there is anything I learned from this, it's that nobody really know what the eff is happening right now, not even the so called "experts".
You don't need to be an expert to know that you need to pay your bills to stay in business. Material and labour shortages happen, changes in housing demand happen, changes in cost of materials happen. They gambled that these changes wouldn't happen so they could make as much money as possible and the gamble bit them in the ass.
@AustriaBargain: fixed price building contracts include a margin (profit) and a contingency. the increase in prices, labour, materials etc exceeded that combined figure, so they are now building at a loss.
To say 'they gambled that these changes wouldnt happen' is saying 'they didnt predict COVID, material supply shortages and labour market shortages'. And that interest rates would shoot up
Of course they didnt predict that. No one in the world predicted that.
Their only options were to have huge contingencies/margins or work on a time and materials basis. The first means they get no work and the second means they get no work. Essentially their options were go out of business or make best estimates based on the information available. They got those estimates wrong.
@dtc: Why isn't every builder in the country bankrupt right now, did they foolishly not leverage themselves enough despite the impossibility of covid?
@AustriaBargain: Because consolidation in the industry means eventually lesser pool of builders leading to monopolistic pricing. They can set the price to become resilient enough to survive.
@AustriaBargain: Because most builders are small and they had one or two loss making contracts that they managed to finish without destroying themselves (but often pretty close) and entered into new contracts at higher prices. Big companies enter into 10s or 100s of contracts. Lose $50k on a few contacts and it’s bearable, lose $50k on 200 contracts and you go down.
Being bigger amplifies everything- profits and losses.
While a lot of subbies shoot themsevles in the foot with unsafe business structures (eg purposely underquoting, or promising 1 brand but using a cheaper subsittute), you still gotta feel bad for the more honest ones who try to do the right thing but still end up stitched up by the builders.
I live in a new estate and I just saw a few Porter Davis ute's drive by…Interesting…
I have a total of 5 Porter Davis homes being built in my general area. It isn't a new estate, established suburb. All are in framing stage. I really feel for them as this couldn't have come at a worst time.
What happens now to the people who have built their house with Dorter Pavis and there are defects found? I have a few mates who have moved into brand new houses in estates and ALL of them have had issues, not small issues either, leaking water coming from under showers, roof leaking, cracks in walls, missing insulation etc, these were all fixed by the builder coming back to rectify. If the builder is not around to fix these who does this and as the owner do you lose money now?
Insurance pay out shifts to the underwriters.
DBI - VMIA?
An hour later, news broke that Lloyd Group - which supports around 200 employees across 59 projects under construction for government clients - had also collapsed
https://www.9news.com.au/national/porter-davis-homes-lloyd-g…
There will be insurers and Gov backed schemes to underwrite the mess but this is exactly why you need stronger white collar criminalisation laws and claw back mechanisms. In my line of work I have never seen a business leading up a year before they declare bankruptcy/insolvency where the management team didn't know what was going on and the inevitable result that was to come.
Sounds like they're angling for some sweet government moolah just like Metricon
My first new build - Avonwood, went under years ago. It was a nightmare, but fortunately Clarendon took over the build a year later and finished it. Then more nightmares. It was just a blaming game over who was responsible for defects. They eventually half arsed fixed it, but not before I got the VCAT involved.
2nd build I went custom (had to, as I live on a hill). I finished 6 years ago, but still spoke to the builder during covid (defect repairs). His biggest issue and he figured he'd go broke was - how the hell do you price something that takes a year to build? If you price in contingency you're too expensive. If you dont, and prices go up…………..
you dont build a house overnight
how the hell do you price something that takes a year to build?
Why is it taking a year to build in the first place?
slab 1 week
frame 1 week
roof 1 week
cladding/bricks 1 week
insulation electrical plumbing fit out 1 week
gyprock 1 week
second fix 1 week
plumbing electrical finishing 1 week
paint 1 week
inspection cleaning 1 week
handover
10 weeks work blows out to over 52
I have been watching them go up around me and the tradies are there a week at a time.
Why not purchase ALL the building products when the owner signs the contract? not 12 months later?
Because logistics. Its not ideal in a sense to buy all the materials at once, complications happen like where are you going to obtain the funds for all the materials? Where are you going to store all the materials, it needs to be protected from the weather, theft and damages while being easily accessible.
What happens if the weather changes, it starts raining. You cant pour a slab when it rains, so it delays it by a week, problem is it pushes everyone out of schedule. Tradies have certain schedules to go and follow through, they cant always be on standby for one project, they likely got multiple new builds at once with a very tight schedule.
What happens when there is something unexpected that happen, something like covid which caused massive delays and lack of materials to go around.
Sometimes it not always that simple to plan. Its the reason why Government infrastructure ALWAYS blows out massively due to lack of flexibility, poor planning and management.
Sorry, but its laughable how much you have condensed the building process! There's a bit more than 10 weeks of work involved lol… 6-9 months sounds about right, but under 3 and you are absolutely dreaming!
Also, where do you propose storing an entire house' worth of materials? Do you expect the builder to buy everything using the 10% deposit?
Bad business management. The rest is noise. They simply took too much debt/risk and didn’t manage their cashflow.
When i heard they had 1500 sites under construction i was blown away
Wow, they had no chance of coming back from that as the build times would have averaging at around 14-16 months (based on approx 100-110 jobs a month and factor in that 25-30% are single storey homes). They would have been starting well over double what they were settling each month. Cashflow suicide
I guess the pent up demand from buyers was too much to resist, and they bit off way more than they could chew.
Problem here is there is no criminal liability to those in PD involved in this Rug Pull. They are all CU in the Northern Territories if you ask me.
you get more consumer protection buying a toaster than buying a house. The only way justice can be served is by vigilante justice. all these tradies and home buyers should just band together and find the residences of these PD directors and just haze their million dollar properties.
It seems they were trading insolvent too…. there will be a lot to come out of this, but you are 100% right…
Volume builders would work on much smaller margins than the little guys, not saying they arent struggling but volume builders also seem to go into liquidation to clear debts and then sprout up new businesses everywhere. Wouldn't be surprised if this is happening here.