House building company Porter Davis goes into liquidation

Prospective home buyers have been given a fresh warning after another major Australian building company went into liquidation.

The reasons behind the latest shock collapse of a major Australian building company have been detailed by an industry expert.

Porter Davis, known for its house and land packages, has gone into liquidation, it was announced on Friday morning.

Insolvency firm Grant Thornton has been appointed to 14 companies under the Melbourne-based group.

“The liquidators will not be trading the PDH Group companies and works on current builds will cease immediately,” Grant Thornton said in a statement.

“The liquidators are working urgently to determine if a solution can be found to support customers and some employees, including by engaging with key stakeholders and potential interested parties who may be willing to take over the current customer contracts.”

Jeffrey Choy, the principal of JCL Legal, who manages major building clients said the soaring costs of materials had put the construction industry under immense pressure.

Hundreds of Porter Davis homes now remain unfinished.

“The problem is that a lot of builders and developers don't actually work on that huge of a profit margin that everyone seems to think they do,” Mr Choy said.

“When you’ve got interest rates (rising)... because builders borrow to build and they employ subbies and they are usually trying to cut these sub contractors down to the best price so that margin there is very narrow.

“And when the original contracts were made – that may have been two years ago – they couldn’t have forecast that (the cost of) wood would’ve gone up by 65 per cent.

“Like all small businesses, medium businesses are dependent on cash flow. So if the prices of your materials have gone up, there’s a shortage.”

Mr Choy also said buyers should go through various checks before moving forward with any one builder for their home.

“It’s very unsettling times for everyone,” he said.

“If you do your due diligence about a builder, check their reputation, check what they’ve done. You might even get a solicitor to do a check on their credit rating.”

More than 1500 properties were under construction by the company in Victoria, along with 200 in Queensland.

A further 779 customers are believed to have signed contracts with Porter Davis, but those builds have not begun.

Porter Davis is known for its house and land packages.

Porter Davis had been forecasting revenue of $555m this financial year, according to the liquidators.

Grant Thornton’s statement detailed how tough market conditions hampered Porter Davis’ efforts to stay afloat.

“The extremely challenging environment for residential home building has directly contributed to the PDH Group’s financial position, with rising input costs, supply chain delays, labour shortages, and a drop in demand for new homes in 2023 impacting the group’s liquidity,” the statement read.

“Notwithstanding the financial support from shareholders and lenders, the group has exhausted options to secure the further funding required to allow Porter Davis to continue to operate viably.

“The directors were left with no option but to place the companies into liquidation.”

Victoria’s opposition spokeswoman for home ownership Jess Wilson said the closure was a blow for people in the state trying to buy a home.

“Daniel Andrews doesn’t care about helping Victorians achieve the dream of owning their own home,” Ms Wilson said.

“A serious fall in building approvals, combined with today’s news and the existing contraction of Victoria’s supply of new housing stock, is just making home ownership further and further out of reach for Victorians.”

More than 470 staff are employed by the company.

Porter Davis’ luxury offshoot, Englehart, will continue to operate.