Metricon blames land titling, development approval delays for widespread “contract repricing”

Metricon has blamed delays out of its control for widespread “contract repricing” that has left customers facing huge increases in construction costs.

Metricon has blamed delays out of its control for a series of “contract repricing” with customers. Picture: Kiel Egging

Home building giant Metricon has blamed delays in land titling, development approvals and other hold-ups out of its control for widespread “contract repricing” that has left customers in some states facing huge increases in construction costs.

Reports of cancellations of fixed-price contracts first surfaced in the Herald Sun in April, and were later aired on the ABC on Thursday, suggesting Metricon was forcing customers into new contracts at much higher prices amid a surge in material and labour costs.

Some Metricon customers were accused of breaching clauses of their contracts while others were offered new contracts due to the expiration of fixed-price periods that had enabled the home builder to re-evaluate the projects’ costs.

A Metricon spokeswoman said about 10 per cent of its customers had been affected by contract cancellations before construction had commenced on their sites, due to delays out of the company’s control.

She said it was currently an “industry-wide” practice for home builders to renegotiate contracts following the expiry of fixed-price periods.

“A small percentage of customers have incurred delays in taking possession of their land titles or other delays impacting building timelines well beyond 12 months (in some cases two years) which has led to inevitable cost rises due to issues affecting building costs,” she said.

“In the event that Metricon enters into a new contract with those customers who have exceeded their contract expiry, the price increase from their original contract to the new contract solely reflects material and labour price rises.

“This is required to ensure Metricon can responsibly and securely complete the 4500 homes we are currently committed to building across Australia this year.”

Customers in states including NSW and Victoria have been affected by Metricon’s contract terminations, but the company said no customers in South Australia had been affected.

Meanwhile NSW Fair Trading is looking into Metricon’s dealings with customers after fielding an increasing number of complaints.

A NSW government register of consumer complaints shows there have been 61 complaints made against Metricon in the first half of this year alone, more than four times the number of complaints lodged for the full year of 2022.

Most of the complaints relate to the quality of service provided by the company.

Like most other home builders Metricon - the country’s largest home builder with 5969 housing starts in 2021-22 - has been grappling with a surge in labour and material costs while being locked into fixed-price contracts, often negotiated at extremely tight margins.

The Morrison government’s HomeBuilder incentive scheme, introduced during Covid-19, created huge demand for new housing, leading to shortages of materials and intense pressure on building supply chains.

Last year Metricon struck a rescue deal with lender, the Commonwealth Bank, amid the spiralling construction costs and concerns it was on the brink of collapse.

Extra measures including a multimillion injection of capital by its owners and a 10 per cent cut to the company’s workforce were implemented to shore up the company’s finances.

The challenges facing the industry have seen construction insolvencies reach their highest level in more than a decade, with figures from the Australian Securities and Investments Commission revealing more than 2200 building companies collapsed in 12 months to June, up 72 per cent from the previous year.

The list includes high-profile builder Porter Davis, which had 1700 homes under construction at the time of its collapse in March.

Metricon has since agreed to help some Porter Davis customers complete their homes.

The company spokeswoman said all home builders were facing similar challenges.

“The challenges facing the building sector have been well publicised, with expired customer contracts being renegotiated by home builders industry-wide,” she said.

“It is important to note that Metricon is committed to fulfilling every valid contract in which a fixed price has been agreed. For more than 90 per cent of our customers, contracts are proceeding without any significant complication.”