QBE Insurance has been forced to withdraw building indemnity insurance from July after a rise in the number of builders becoming insolvent. Legislation in many states requires home builders to hold indemnity insurance to protect the property owner in the event the builder collapses, disappears or the builder passes away.
A QBE spokesperson said “QBE has reassessed its participation and we consider it no longer viable as significant increases in premiums would be required.”
Lobby group, Master Builders Australia says the industry is facing a crisis not seen since the collapse of HIH.
The Australian reports, “The South Australian Labor government said it would not let the market collapse, with options now being considered to cover the shortfall.”
With the market expected to further deteriorate, it is unlikely any insurer will touch the sector forcing the South Australian state government to pick up the pieces at the expense of the taxpayer.
» QBE pullout tipped to spark building crisis – The Australian, 15th March 2013.
» QBE Insurance to withdraw from building indemnity insurance market in South Australia due to too many builder insolvencies – Adelaide Now, 15th March 2013.
» ‘No better time’ to flog a dead horse – Who Crashed The Economy, 20th October 2012.
i live in South Australia, things are really bad here. just drive down the street, you can see no houses are being built at all, offices for rent/sale everywhere, and the number of homes/office are for sale keeps rising every day.
The South Australian Labor Government spent trillions of money to built up new buildings the past few years, includes school, hospital, police station, courts etc.
now, they run out of money. so they have to cut funds from schools, hospitals, police, court etc. people are losing their jobs because of these funds been cut.
first they stole the jobs from other people to give them to the builders, then when all the projects finished, everybody loses their jobs, includes the Labor Government itself.
The South Australian Labor Government says it is “No Better Time” to buy or build a new home, but now the builders are going broke. http://www.nobettertime.com.au/
How much taxpayer money do we need to waste in these difficult times? We bail out the construction sector with a housing construction grant and when the builders go broke and we have to foot the bill to insure them because no one else will take the huge risk. Doesn’t the government know this housing bubble is the biggest in Australian history and they won’t have the resources to keep proping it up. It will crash one day.
I see the Housing Construction Grant (HCG) finishes at the same time QBE pulls the building indemnity insurance.
I agree Peter, the website almost looks like a REI presentation ! Then we have todays item highlighting ADL’s biggest price drops ! Not sure if they are bargains as they say, but more like vendors coming to the realisation buyers just will not pay inflated prices like times gone by.
http://www.adelaidenow.com.au/realestate/news/south-australias-top-30-property-bargains-revealed/story-fndbnymu-1226598564507
When big insurers start pulling out of the market you know things are not going well. They have an army of actuaries using sophisticated statistical analysis to identify opportunities and threats well in advance. They are the proverbial “canary in the coalmine”. Some other insurer (or, more likley, government) may step in to fill the void but getting indemnity insurance is going to be a lot more difficult and expensive.
The consequence here is that it will push up the cost of construction which will further depress the sector. Australia’s days of an insulated, high-cost economy are coming to an end. Rough times ahead for some.
Wow that nobettertime website reeks of desperation
@AverageBloke. Sure does – construction was in free fall at the time it was launched.
http://www.whocrashedtheeconomy.com/blog/2012/10/no-better-time-to-flog-a-dead-horse/
WCTE,
Are we just looking here at a picture of a stabilising population and relatively little demand for new housing in SA? In other words, it’s just not that attractive to move to SA for interstate or overseas migrants, the local population isn’t increasing at a high rate, and so on. That will always upset developers and builders, of course, because there is only building replacement work, not a lot of new work. The thing is, developers’ entire business model requires relentless population growth — no matter where that may lead. Or else a lot of cashed-up Chinese investors keen to buy housing stock while putting no-one in it.