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Highlights
- The collapse of home construction company Privium has left the future of hundreds of housing projects in jeopardy.
- Privium has halted 160 projects as it evaluates its financial position.
- The Group has debt of over AU$28 million.
With the collapse of Brisbane-based home construction company Privium, the future of hundreds of unbuilt homes has become uncertain, dashing hopes of several buyers. The Group has halted 160 projects as it evaluates its financial position.
On Thursday, Privium, one of the busiest residential builders in Australia, filed for voluntary administration. The Group, which operated under the trading name Impact Homes for over two decades before changing its name in 2019, is sitting on a debt of over AU$28 million.
Joanne Dunn, John Park and Kelly-Anne Trenfield of the global firm FTI Consulting have now been appointed as administrators of the Group led by director Rob Harder.
What led to Privium’s collapse
While the country’s real estate sector is seeing a boom, labour shortages, lockdowns and surging constructions costs are gradually hurting the industry. Several businesses have felt the pinch in the last few months, with Privium, a group that has so far completed over 600 projects, becoming the major casualty.
The Group posted over AU$28 billion in losses in 2020. It has failed to file a financial report in last 12 months. Since August, the Group saw its three directors - Neil Wormwell, Donald Wormwell and James Harder – making an exit.
In a letter to its 25 shareholders, Privium said: “The last six months have been very difficult in our industry with the continued supply and demand challenges, significant price increases and ongoing lockdowns in Victoria and NSW.”
Image Source: © Sarawutnirothon |Megapixl.com
Construction costs rise
Since the launch of the goods and services tax (GST) in 2000, the country has recorded the largest cost increase in the construction sector. In the September quarter, the construction costs rose by nearly 4%. The costs increased by just over 7% for the full year, as per the Cordell Construction Cost Index.
The largest rise in construction costs has been registered by Queensland, which witnessed more than the 4.6% quarterly rise in housing prices. Challenges on the supply chain front and shortage of skilled labour have only added to existing woes, making it difficult for real estate firms to absorb the costs into their margins.
Meanwhile, the Australian Prudential Regulation Authority (APRA) last month raised the minimum interest rate buffer it expects banks to use while evaluating the serviceability of home loan applications to check surging risks in home lending.
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