Small builders are under threat as the banking royal commission has caused rippling effects to the local housing market.
The current situation with the banks pulling back and lowering Loan to Value Ratio’s means that multi-national housing companies are taking advantage of consumers by not disclosing what is not included in the contract. Something which local builders don’t agree with.
According to local builder Matt Jenkins this is the “biggest issue” facing Wagga’s housing industry at the moment and could be detrimental to small builders.
“After the banking inquiry, a lot of dramas with new systems and regulations have come into focus and anyone that is signing a building contract must prove they have five to 10 per cent left over in funds for any variations,” Mr Jenkins said.
“The banks used to lend you 95 per cent of the house and while they’ll still lend you this percentage, they want to see $10,000 to $20,000 in the bank in case there are variations in the contract.
“For new investors and first home buyers who have no allowances for them to run over in the contracting, means they are struggling and unable to afford a house.”
However, it is not just consumers who are being affected.
“National companies like Metricon do not include everything in the contract and so their completed product doesn’t include basic necessities like floor coverings, fences, concrete driveways and paths,” Mr Jenkins said.
“People end up with a half-completed house and still have to fork out up to $80,000 and they usually don’t have the money.
“Now banks are making sure that people have spare money, but this is not all the market, it’s only the 60 per cent of the builders working in the large companies.”
Mr Jenkins argued that while the banking inquiry has been good for some, it could be the “downfall of the small builder”.
“I’ve got a couple that I’m signing up and I know that the contract won’t run over, but the banks are telling them they must have $17,000 sitting in their account,” he said.
“As a builder, we pride ourselves on including everything in the contract, like the pathways, driveways and landscaping.
“It nearly motivates us to be a little bit dis-truthful; if you came to me to buy a house off us in Forest Hill, the first thing I’d tell you would be that the ground is high plasticity down deep potentially causing a lot of movement. Therefore your slab will cost about $10,000 dearer.
“We’ve always been upfront and that’s why we have never had claims made against us at Fair Trading.
“The small local builder, builds a better product and there’s probably 20 of us in Wagga that don’t have salesmen earning big commission,” Mr Jenkins said.
This comes as the Australian Securities and Investments Commission fined Metricon $50,400 over advertising, on October 2, which misled first home buyers about the deposit they had to pay to secure a house and land package.
“Following an ASIC review, Metricon Homes received notification of potential misleading conduct and misrepresentation in respect of a marketing campaign for Metricon’s Home Solution brand,” a spokesperson said.
Mario Biasin, CEO of Metricon, said he regrets any actions that have been interpreted as misleading.
“Metricon strives to make high-quality homes accessible to Australians regardless of budget and we remain committed to this undertaking,” Mr Biasin said.