SA home building insurance fees to increase by 10 per cent from November 2, 2020
A spate of home builder collapses is about to hit the hip-pocket of consumers who face an imminent hike in construction costs — and the state government’s been accused of adding to the burden.
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South Australians building a house or renovating will have to pay more to insure their projects owing to the fallout from a string of South Australian building company failures.
Treasurer Rob Lucas has revealed building indeminity insurance premiums will increase on average $148 to $1047 from November due to a blowout in claim costs, which he blames on a spate of builder collapses.
But the hike has been attacked by builders who say it is excessive and will coincide with a rush of building applications under the federal HomeBuilder scheme.
Building indemnity insurance - which is mandatory for any work that requires development approval and is valued at more than $12,000 - covers homeowners for up to $150,000 in the event their builder goes broke, dies or disappears and can’t finish the project.
Mr Lucas said the Government - which underwrites the insurance scheme through the SA Government Financing Authority - had lost $11m each year in the past two financial years covering claims.
“Nineteen builders went broke in about the last 12 months and up to $20m in claims had to be paid out (last financial year) and that money has to come from somewhere, and it comes from the insurance scheme,” he said.
Mr Lucas said the $148 increase was based on an independent review of the scheme which determined the increase necessary to run the scheme at a “break even” cost in the wake of “significant number of builders going broke”.
Asked how to prevent further hikes, he said “builders should stop going broke”.
Last year was a horror period for the state’s building industry which was rocked by a string of collapes, forcing homeowners to lodge insurance claims with the government.
The largest was the failure of Coast to Coast Homes last May which left nearly 90 unfinished properties and generated insurance payouts in excess of $4m.
At the time Mr Lucas said that insurance premiums may need to be reviewed in light of Coast to Coast’s impact on insurance claims.
QBE, is the government’s insurance agent, wrote to builders on September 2 advising premiums would rise by 10 per cent from November 2 in light of “increased claims costs”.
QBE pulled out of the SA building indemnity insurance market in 2013 citing rising costs in providing cover due to increased number of building insolvencies.
Housing Industry Association SA executive director Stephen Knight said the increase would come in when the industry is expecting increased building activity generated by the $25,000 HomeBuilder grant.
“The Treasurer (Rob Lucas) should at least change the date (of the increase) until after the December 31 cut-off date for the grant so first-home buyers and those taking advantage of the grant are not hit with a price increase before they even get started,” he said.
Master Builders SA chief executive Ian Markos accused the government of using the expected influx of housing applications under the HomeBuilder as a “cash grab”.
“The majority of HomeBuilder contracts will be signed in November and December, straight after premiums jump a massive 10 per cent,” he said.
“A 10 per cent hike is clearly exccessive and will have a negative impact on housing affordability.
“It’s true payouts spiked when Coast to Coast went under, but because of this builder’s incompetence good operators have to suffer.”
Revenue SA has received nearly 300 applications for the HomeBuilder grant.
