A quarter of Australia's $240 billion building sector was on fixed-price contracts, 24.2 per cent of 73,000 businesses. Porter Davis halted 1500 Victorian and 200 Queensland builds; UDIA president Max Shifman said contracts signed before costs rose about 30 per cent in two years could not be renegotiated.
As I told The Age: “I would expect the vast majority of volume home builder contracts to be fixed price, though some have escalation clauses which apply if construction doesn't commence with a certain period of the contract being signed.”
I also said: “If you signed a contract just before costs started to grow quickly, and then you're building during a period where those costs are starting to come into play, that's when you get into trouble,”
And I added: “In the case of someone like Porter Davis, if they've signed these contracts and couldn't renegotiate them, then as they were building, they were losing money, and there's only so long you can do that.”
The Age, 4 April 2023 — Read the full article