Beechwood Homes goes bust with 300 houses unfinished May 14, 2008 12:00am
HUNDREDS of homebuyers could lose their deposits and their new homes after administrators were appointed yesterday to Beechwood Homes, NSW's largest homebuilder.
Building work is continuing on around 300 new homes in the hope that the company can find a new buyer to pay for them to be completed.
In the meantime, hundreds of buyers, many of whom have already handed over thousands of dollars towards their dream property, now face a nerve-wracking wait to see if a buyer comes forward before the builders stop work.
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"Overheads basically became too high" said Andrew Wiley of Armstrong Wiley, the administrators appointed yesterday.
It is understood that the spiralling cost of mortgages decimated the company's sales as buyers backed off. High rates also made repayments on its own debts unsustainable.
"When buyers look at a property, they do their sums and figure out how much they can afford to pay, and increasing interest rates have certainly had an effect on the levels of business."
"We are hoping to sell the company as a going concern and are inviting interested parties to get in touch."
Wiley said that the 300 properties under construction are 'effectively owned' by individuals and the company is 'building them under contract on their behalf'.
However, he could not guarantee that customers would not suffer losses.
"Hopefully if they (the buyers) have put a deposit down, they (the builders) will continue to work on their home until completion. The builders are carrying on working in the hope of the company finding a buyer."
"We are talking about properties worth $400,000-$500,000 and increasing mortgage costs means repayments have become very substantial."
Beechwood owes a total of $20m, made up of $10m in secured debts to a bank, and $10m in unsecured debts to its builders and contractors.
"Obviously you have a certain level of overheads if you are building 25 properties a week, which was the case until recently. But when you still have those overheads but are only building 12-15 homes a week, then that isn't enough to keep the business going" said Wiley.
Rising rates have hit the building industry hard, with building approvals (the number of new homes being built) down by 5.7 per cent in March, as high rates stem consumer demand.
Beechwood employs over 90 staff at locations around NSW.
The administrators are in the process of contacting all buyers and creditors, with the first creditors meeting scheduled for about a week's time.
"We will meet with the bank and see what action it wants to take, then move on from there" said Wiley.
