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Brianna signed up for a home build. Three years later she lives with her parents
A fresh threat is emerging for home builder customers caught in the state’s housing construction gridlock as looming bank deadlines put loans and livelihoods under threat.
The passing of construction loan deadlines means many Perth people are now paying principal and interest on loans rather than interest only – for incomplete homes, and on top of rent.
Brianna Murphy remains doubtful her home will be completed by the end of 2024.Credit: Claire Ottaviano
Despite paying both principal and interest on her unfinished home in the new outer north-eastern suburb of Bushmead, Brianna Murphy counts herself as one of the lucky ones: she can avoid rent by staying at home with her parents.
The 29-year-old signed a contract with BGC in 2020, with a construction deadline of June 2023.
When the construction loan expired she chose not to apply for an extension of the interest-only period, reasoning that she could use the money her parents were saving her on rent by beginning to pay down the mortgage.
“I’m essentially paying for my mortgage now, but I don’t have the freedom of … a homeowner,” she said.
“It’s a pretty pivotal time in your life, your late 20s, early 30s and living at home puts a spanner in the works a little bit; you want to settle down and focus on the next stage of your life.”
Asked who is accountable for the tens of thousands of extra interest dollars people are paying, Master Builders WA chief executive Matthew Pollock said it was a complex problem.
He said residential building contracts typically had an agreed timeline and builders who did not meet these may face financial penalties called “liquidated damages”.
“Equally, there are clauses that give the contractor an ability to seek extensions of time for reasons outside their control – if a builder had ordered materials and there was an unusually long delay in the supply of those materials, that may be considered an issue outside the control of the builder,” he said.
Pollock said while the industry was showing clear signs of recovery, the construction crisis continued to leave its mark.
A row of terrace homes in Bushmead, near Helena Valley, awaiting completion. Credit: Claire Ottaviano
“It’s a concerning situation and I sympathise with the homeowners, the more interest they pay the more [the whole home] costs them,” he said.
“I would call for the banks to show some understanding for what are some very difficult and unique circumstances.”
Another BGC client, who would only speak to WAtoday on condition of anonymity, has been waiting for his northern suburbs build for around three years.
The Commonwealth Bank told him he would need to reapply for his loan’s final progress payment as the completion deadline had passed, but in a last-minute reprieve, agreed to extend the deadline on his build for the third time.
He still fears the final payment will be cancelled and that he will have to reapply, because in the years since he got the loan his income has dropped, interest rates have risen and he may not be able to borrow enough.
Already unable to pay for both the monthly loan repayments and rent, he moved out of his rental and has had to stay with various friends. In trying to cope with his expenses he has racked up a credit card debt of more than $30,000.
“From someone who had a good credit score, my credit rating is now ruined,” he said.
“All I want is a place to live and a place I can call my home.”
A spokesperson for Commonwealth Bank said the bank had responded to the situation by extending building completion deadline to three years and encouraged clients to make contact if they were in difficulty.
BGC announced it had ceased all new home sales in April 2023.Credit: Claire Ottaviano
Another BGC client building in Mandurah, also speaking anonymously, described the stress of being forced to work up to 100 hours a week after his bank said they could not extend his loan’s interest-only deadline.
The man and his wife, who have two daughters at home, are now paying up to $6500 a month in both rent and mortgage payments.
“It’s been a living nightmare,” he said.
“We just have to keep our heads down and keep working.”
A Bankwest spokesperson confirmed one in five construction loans had been extended past the 24-month deadline as of June 2024 – above the bank’s long-term average.
The spokesperson also said Bankwest customers only paid for the interest on their construction loan until the build was complete, unless they requested otherwise.
In April 2023, BGC announced it had ceased all new home sales to focus on completing houses for its existing 4000 clients.
“This has been a successful decision in that BGC has completed and handed over more than half its homes under construction in this period,” a spokesperson told WAtoday this week.
They said they were completing 40-50 homes a week with more than 90 per cent now in the final build phase.
“To achieve this construction rate, BGC has borne significant rate escalations at every single stage of the build process,” they said.
In September 2023, a law firm secured funding to represent thousands of BGC customers in a lawsuit over the delays. BGC says it will vigorously defend this action.
About 1100 West Australians have joined a new group, BGC Casualties, in a bid to share experiences, support each other and lobby members of parliament.
The state’s Building and Energy agency encourages people who believe their builder has breached an agreed timeline to lodge a dispute with Building and Energy.
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