[+] Costs Crisis: Metricon Confirms Contract Renegotiations

Australia’s largest home builder, Metricon , has been forced to renegotiate contracts with customers as the cracks widen in the nation’s construction crisis. Metricon chief executive Mario Biasin confirmed that the builder was in the process of renegotiating contracts “in a small portion of contracts where customers have not met their contractual commitments”. “ Metricon is assisting the customer at their election to enter a new contract reflecting current pricing,” Biasin said. Metricon has been in the building industry for 40 years. Biasin would not elaborate, but said it was not the same thing as handing back contracts. “ Metricon is committed to fulfilling every valid contract in which a fixed price has been agreed,” he said. “ Metricon operates within the law and according to the terms of signed contracts. We also seek to work collaboratively with affected customers to find solutions and are factoring in their individual circumstances.” ▲ Metricon has confirmed in is renegotiating some contracts. Industry speculation that Metricon was handing back contracts began percolating last year. When approached by The Urban Developer , Metricon’s Biasin dismissed the rumours as "malicious, false and baseless”. Metricon undertook 6052 new home starts in the 2021 financial year, up from 4534 the previous year, according to the HIA-Colourbond Steel housing 100 report . Angry customers have contacted The Urban Developer about the situation, saying Metricon was not honouring contracts. One customer has begun litigation against Metricon, they said. “We are now in February and Metricon sent me a letter cancelling my contract, with the excuse that they cannot keep the price due to Covid, and I have to pay $80,000 if I want to go ahead. Or walk away and leave my $20,000 deposit. They are not honouring contracts,” one customer said. ▲ Construction sector insolvencies have risen to 28 per cent of total insolvencies. Metricon isn’t the only builder feeling the heat. The competing pressures of a white-hot property market and rising construction costs are claiming victims as builders are pushed to the brink. News that tier-one building contractor Probuild had called in administrators due to cost blowouts and delays increased speculation that it is just the tip of the iceberg for the troubled construction industry. It’s left staff and contractors reeling. “The demise of a business with the scale and reach of Probuild is bound to send shock-waves through the industry as thousands of small businesses are impacted,” CreditorWatch chief executive Patrick Coghlan said. “Sadly, I fear we could see many more going under as an industry already under significant pressure is dealt another heavy blow.” Other high-profile casualties include Melbourne’s ABD Group and Brisbane-based homebuilder Privium, which folded in November owing $28 million . The Tasmanian franchise of home builder Hotondo Homes entered liquidation at the start of this year, with 40 unfinished homes on its books. Liquidator Revive Financial confirmed that the difficulties in obtaining building materials and the increased costs of these materials were to blame. The federal government had hoped that the nation could build its way out of the pandemic. More than 121,000 people applied for the HomeBuilder grant , which is expected to support around $30 billion of residential construction projects. But industry insiders say the $2.5-billion support package over-stimulated the sector and pushed builders to the brink. And the cracks are starting to show elsewhere. Building industry insolvencies rose to 28 per cent of total insolvencies at the end of last year, rising from 27 per cent in March 2020. You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

[+] Costs Crisis: Metricon Confirms Contract Renegotiations

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