Homebuilders will be slugged with a huge rise in insurance costs after the collapse of several construction companies triggered record claims.
Domestic building insurance would increase by 53 per cent from August, the Victorian Managed Insurance Authority said on Thursday
This includes a 65 per cent spike in the cost of premiums for new homes, single and multi-unit dwellings and owner builders.
Renovation insurance will increase by 20 per cent.
An authority spokesman said it received 4000 settlements over the past 12 months to finish new homes for buyers.
"We have made record claims payments due to the compounding factors of builder insolvencies, high inflation and skilled worker shortages, all of which impact build costs," he said.
The spokesman said the price spike was aimed at ensuring owners were protected as the number of builders unable to complete homes increased.
“DBI premiums in Victoria remain lower than comparative premiums in NSW – and they are significantly lower for new builds,” he said.
It has been a dramatic few years for the domestic building industry, hallmarked by the collapse of big builder Porter Davis Homes.
About 1700 homes across Victoria and Queensland were left in limbo when Porter Davis collapsed suddenly in March 2023.
Some 560 clients were not covered by insurance despite paying the construction giant before it went into liquidation, forcing the state government to set up a $15 million bail-out scheme.
Montego Homes went into voluntary administration in January 2024 citing the impact of rising building costs.
The Victorian Building Authority later revealed the company failed to take out domestic building insurance across 64 sites despite receiving almost $900,000 in deposits.
Under Victorian offences enacted in February, builders who fail to take out domestic building insurance face a fine of up to $96,000 for individuals and $480,000 for companies.
Previously, businesses could be fined for not carrying out, managing or arranging domestic building work for contracts worth $16,000 or more without the required insurance.
