New home buyers can better protect in South Australia

Building a new home can be a disturbing experience. The South Australian government has made changes to make buyers more at ease.

After reviewing South Australia’s construction compensation insurance requirements, the state government has increased the maximum insurance spending consumers can claim if their build fails to complete.

If the builder is unable to deliver the job due to bankruptcy, disappearance or death, the maximum payment method is now $250,000, up from $150,000.

South Australia has made changes to its construction compensation insurance to provide greater protection for buyers. Image: Getty

---

The builder will get this insurance to cover its clients if the contract work cannot be completed. In South Australia, every residential project that requires development approval and is worth more than $12,000 must cover compensation insurance.

South Australia Government Finance Bureau, through its insurance department, currently establishes the vast majority of compensation insurance policies in the state, which are facilitated by QBE insurance.

According to the reform, policy restrictions on all QBE policies will be raised from $150,000 to $250,000 from October 1, an increase of 66%.

For builders who have to purchase insurance, premiums will increase the value of the build by 0.1%.

For example, the average premium for new construction or renovations worth between $500,000 and $750,000 will increase from $2,251 to $2,814, with the difference of $563.

The South Australian government intervened in 2013 in 2013 construction compensation insurance without this insurance. Since 2023, at least another insurance company has come to the market to provide construction compensation insurance for South Australia.

The state government will implement reforms so that all insurers must provide higher levels of insurance.

Since 2013, the South Australian government has been underwriting the vast majority of construction compensation insurance issued by the state. Image: Getty

---

In recent years, higher input costs and other financial pressures have led to higher bankruptcy rates for builders since the pandemic began at the age of 19, which has started supply chain issues that have swelled construction costs dramatically.

Prices have since increased and, despite being at high levels, put pressure on home builders.

The South Australian government said it provided a record $18.7 million through insurance spending in the 2023-24 fiscal year to help consumers complete construction and renovations after builders can’t do that.

The government reports that more than 100 claims are currently being processed due to the state’s recent bankruptcy of builders.

South Australia’s Consumer Affairs Minister Andrea Michaels said the government believes the update of the plan is a necessary condition to protect consumers.

“Buying a home is the biggest investment most people will make in their lives, and it’s so important that people have enough construction compensation insurance when they are built.”

Are you interested in learning more about building a home? Check out our dedicated new home section.