Victorians slugged with huge building insurance hike of 43 per cent

Victorians will be hit with a 43 per cent increase to Domestic Building Insurance as surging costs continue to wallop the building industry.

Victorians will be slugged with a 43 per cent increase to Domestic Building Insurance as the home building industry continues to feel the strain of surging cost and company collapses.

The Victorian Managed Insurance Authority on Monday announced the increase to premiums, which will take place from September 1.

Demand with the authority has surged in recent months as multiple volume builders have gone under amid soaring costs.

They have also been scrambling to assist victims of the Porter Davis collapse, with many customers left uninsured despite legal requirements for builders to take out coverage when receiving a deposit.

To help these customers, the Andrews government pledged to honour DBI for those who had paid their deposits.

Housing Industry Association executive director for Victoria Keith Ryan said the decision to increase premiums for this insurance by 43 per cent was a “blow for Victorian home builders and their clients”.

He said the size of the increase was unfair and without precedent.

The Victorian Managed Insurance Authority has been scrambling to assist victims of the Porter Davis collapse. Picture: Jason Edwards

”The Victorian government’s decision is only about improving the financial performance of the DBI scheme and is premature as the industry waits for the government to announce possible reforms to the scheme,” Mr Ryan said.

“This premium increase, which will directly add to the fees and charges paid by home buyers, will not be accompanied by any changes to the insurance benefits.

“The increase also adds to many challenges facing the residential building industry.

This will do nothing to help deliver an increased number of desperately needed new homes.”

Mr Ryan said the change would also squeeze the cash flow of home builders who were already struggling with rising costs of labour and materials.

He said the size of the increase was unfair and without pre

“Builders want to stay competitive, but they will have little option but to factor the premium rise into the cost of a new dwelling and pass it on to home buyers,” he said.

“Last week’s decision by the Reserve Bank to keep interest rates on hold provided a respite for the embattled residential building sector.

“This announcement has dented that relief and is a stark reminder to home builders that the cost of doing business in Victoria is getting harder, not easier.”

Master Builders Victoria executive director Megan Peacock said they understood that insurance needed to increase to remain sustainable.

But she said any increases in costs during this period would be difficult for builders and also customers.

“DBI gets passed entirely on to the customer,” she said.

“The builder only has to outlay that $5000 to start with but then that will come back when they get their deposit.

“The builder can’t legally take any money until that insurance is purchased.”

Ms Peacock said Victoria’s DBI was slightly cheaper than New South Wales.

Opposition housing affordability spokeswoman Jess Wilson said a premium increase would not fix systemic problems in residential construction.

“That’s why a comprehensive and independent review of the sector is urgently needed to help restore confidence and build a sustainable pipeline of new homes,” she said.

“In the midst of a housing supply crisis, residential builders and Victorians trying to build their own homes are being slugged with an insurance increase to pay for the Andrews Labor government’s failure to act on risks in the sector they were warned about 12 months ago.

“The financial mismanagement of the VMIA has seen it slide $250 million into deficit and now hard working Victorians building their own homes will pay the price.”