A Perth developer has demolished a $165 million luxury tower in which more than 50 percent of the apartments were bought off plan, blaming skyrocketing construction costs and labor shortages.
The high-rise development, which is due to start construction in April and will consist of 98 apartments on 38 floors, was to be built in South Perth by developer Sirona Urban and Singapore-listed real estate giant Chip Eng Seng.
The tower block would have been one of the tallest residential buildings in Perth but instead buyers are now getting their deposits back.
Matthew McNeilly, owner of Sirona Urban, said construction costs have risen 30 percent over the past 10 months, while a shortage of tradespeople also caused problems.
“We will be writing to our buyers individually to inform them of the decision and the refund, and I will speak to as many as possible personally. You deserve to hear directly from me about the decision we have made,” Mr McNeilly said Australian Financial Report.
“Nobody predicted the impact of Covid on the building materials supply chain, which has resulted in cost increases of up to 30 percent.”
$500 million project fails
It’s the second major housing project in Australia to fall this week.
A Melbourne developer, Central Equity, has abandoned plans to build a $500 million residential tower on the Gold Coast, blaming the construction industry crisis and rising construction costs for making the project unviable.
Development was set to begin this year with 486 apartments in a 56-story tower known as Pacific One, to be built on a beachfront block in Surfers Paradise.
Apartments have been selling from a starting price of $650,000 each, but “industry insiders” had claimed unit prices would have to rise 20 percent to cover increased labor and construction costs, Central Equity said.
The developer refused to reveal how many off-plan apartments had sold for the project, but said buyers had been informed that construction had been canceled and their deposits had been returned.
Central Equity has been in operation for 35 years and has completed 85 developments, but this will be the first time a project has not been completed by the developer.
The accumulation of failed construction companies
It comes as the construction industry has been plunged into crisis with a series of corporate failures.
Earlier this year, two major Australian construction companies, Gold Coast-based Condev and industry giant Probuild, went into liquidation.
The dismal list has continued to grow as a number of other high-profile companies also collapsed, including Inside Out Construction, Dyldam Developments, Home Innovation Builders, ABG Group, New Sensation Homes, Next, Pindan, ABD Group and Pivotal Homes.
Others joined the list including Solido Builders, Waterford Homes, Affordable Modular Homes and Statement Builders.
Then, other victims of the crisis were two Victorian home builders who went into liquidation at the end of June, with a homeowner spending $300,000 on a semi-finished home.
It is the second Hotondo Homes franchisee to go under this year, according to a report by bankruptcy trustee Revive Financial. His Hobart office collapsed in January because he owed creditors $1.3 million.
Meanwhile, a Sydney family faces never being able to build their dream home after their home builder Jada Group collapsed over $2.4 million in March, taking the cost to build their home to $1.9 million are a whopping $800,000 more than the original offer.
Snowdon Developments has been ordered to liquidate by the Supreme Court with 52 employees, 550 houses and more than 250 creditors that owe nearly $18 million, despite being partially bought out less than 24 hours after it went bust.
Dozens of homeowners and hundreds of trades have been reeling after a Victorian homebuilder called Langford Jones Homes went into liquidation on July 4, owing $14.2 million to 300 creditors.
News.com.au also posed questions about NSW builder Willoughby Homes, which is under investigation by the Government after construction stalled and debt rose to 90 days.
There are between 10,000 and 12,000 homebuilders in Australia undertaking new homes or major renovation projects, a figure estimated by the Association of Professional Builders.