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Would-be home builders in regional Victoria are more cautious than ever about who they choose to build with, real estate agents say, as yet another construction company struggles against strong economic headwinds.
Key points:
- Harmac Group enters administration with incomplete builds in Ballarat, Bendigo, Geelong and Melbourne
- Real estate agents say potential home builders are more careful than ever about who they engage
- Data shows building permits in Ballarat have decreased after a pandemic peak
Harmac Group entered voluntary administration this week, with administrators appointed to oversee the restructure and construction projects paused for the next five weeks.
This meant tools would be downed on 50 sites under construction — 15 in Ballarat, 21 in Bendigo, 11 in Geelong, with the remainder in Melbourne.
A spokesperson said the company intended to finish 15 of these homes which were close to completion during the voluntary administration.
The building company, which covered the Harmac Homes, Harmac Constructions, Harmac Urban Living and Ridge Homes brands, was the latest to suffer financial turmoil amid increased economic pressures on the industry, including high material costs and labour shortages.
Earlier this month, Ballarat-based Bond Homes entered voluntary administration with 16 homes unfinished, while Porter Davis went into liquidation in March and left 1,700 homes incomplete.
Buyers doing due diligence
Ballarat Real Estate senior sales consultant Damian Larkin said the construction industry's well-known challenges had not deterred people from purchasing bare land, but those with new-build plans were more scrupulous in doing their due diligence.
"[Buyers] are certainly doing a lot more research in regard to the possible builders that they're looking at building their dream home with."
He said the cautiousness had increased since the COVID-19 pandemic and the increased number of builders who had gone bust.
"In particular with those recent events, [buyers] are certainly doubling down with their research on who to build through."
Ray White Ballarat director Will Munroe said he counted an increase in land blocks for sale in the area, as people who had purchased plots during the pandemic looked to offload them due to the increased cost of construction.
For land that had not yet received a title, Mr Munroe said people used sunset clauses so they could hand the block back to the developer and have their deposit returned.
"There's a lot of resale blocks hitting the market because people just don't want to go through the hassle of building because it costs too much," he said.
"And now they're looking to buy established homes because it's more affordable for them."
Fewer home builds consented
Building permit data suggests people have avoided new builds.
The City of Ballarat's Draft Housing Strategy (2023-2041) showed the number of permits for new homes had dropped after a peak in the second year of the pandemic:
- 2019 — 1,035
- 2020 — 1,766
- 2021 — 2,045
- 2022 — 1,642
The strategy, which was released for public consultation this week, estimated 29,000 new dwellings would be needed in Ballarat by 2041 to accommodate an extra 55,000 people.
'No secret that builders face challenges'
Harmac Group's woes left 23 people redundant on the corporate side of the business while 16 employees had been kept on.
In a letter to clients viewed by the ABC, the company's managing directors, Paul McMahon and Bryan Milne, sought to calm home builders and stressed the company had not collapsed, nor was it in liquidation.
"Voluntary administration is a process that will help us restructure our business to make it more sustainable," the letter read.
"Our intention is to work with the administrator on a plan to get our business back on track and enable us to complete your home."
In the letter, Mr McMahon and Mr Milne referenced the challenges the building industry faced.
"It's no secret that builders are facing many challenges right now, with spiralling material and labour costs and rising inflation putting unprecedented pressure on the construction sector.
"Given these economic challenges, we had no choice but to enter voluntary administration to restructure so we can better navigate this period of uncertainty."
Shaun Matthews and Barry Wright from Cor Cordis were appointed voluntary administrators of Harmac Group this week.
They said in a statement that an urgent review of the company's financial position was underway and a proposal to restructure the business would be developed.
"We will be providing regular updates to all stakeholders as we work through the voluntary administration process."
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