What happens to my half-built house when the builder collapses?

Master Builders warned that those who want to buy and build new homes must take into account “volatile” market conditions, which are very likely to cause more construction companies to collapse.

Pivotal Homes was the last in a series of builders forced to liquidate last week, after the big companies Condev and Probuild earlier this year.

As a result, some potential homeowners have found themselves in limbo with 103 houses still under construction by Pivotal and 177 others awaiting council approval.

But while home buyers can expect delays and increased costs, Gold Coast Master Builders Regional Manager Adam Profke says, “We can assure you that your house will be completed.”

What happens when a builder collapses?

When the construction company goes into administration, the Queensland Home Warranty Insurance Scheme (QHWS) is launched.

The premium paid is usually included in the construction contract and is mandatory for all projects worth more than $ 3,300.

A spokesman for the Queensland Building and Construction Commission (QBCC) said the type of aid covered by the scheme would depend on the construction phase.

“If the work has not yet started, the deposit will usually be returned within two weeks of providing all the required information,” the spokeswoman said.

“If work has begun, QHWS will compensate the owner for the additional cost of completing his house up to a compensation limit of $ 200,000 for standard coverage and $ 300,000 if optional additional coverage has been agreed.

Adam Profke said that although most buyers should not be left out of pocket, there could be delays as builders face cost pressures.

“You have a $ 200,000 reserve,” he said.

“If something has changed significantly, it could be a small amount out of pocket.”

How to choose the right builder?

Mr Profke said that despite the “volatile” market, there were still opportunities for people who wanted to build a house.

“Is it about going to a reputable builder and basically talking to him about how many projects you have behind you, what is my real time of implementation?” he said.

But he said land availability is still a “big driving force”.

“If the registration of land takes six months to a year, it probably doesn’t make sense to sign a contract today,” he said.

“A lot of customer builders say, ‘Look, I can’t build a year, come back and you’ll see us in a year.’

Mr Profke said there was no “silver bullet” and that builders and their customers should be realistic about what the wider uncertainty in the industry meant for each project.

Will there be more builders?

According to the Statistical Office (ABS), 1,816 building permits were approved on the Gold Coast in 2020–2021 and 1,781 in 2019–20.

Mr Profke says that although “a lot of work” needs to be done, more construction companies are likely to go bankrupt.

“Demand in this sector has not declined in the last two years,” he said.

“The industry was educated and saw what was going on in the market.”

Despite the high demand, Mr. Profke said that due to supply chain problems and continuing uncertainty, it is difficult to predict when the market will stabilize.

“Most of the products that come into the home in Australia, very few are actually made here,” he said.

“We were surprised by the volume of wood recently [that] comes from the Balkans and Ukraine.

“China has extended the blockade to some of its key manufacturing areas, which will again put further pressure on the industry.”