Victorians are facing a major increase in the cost of new and renovated homes after the public insurer announced a massive increase in building insurance premiums in “yet another blow” to the state’s troubled housing industry.
Victoria Shadow Treasurer Brad Roswell says “vulnerable Victorians” are the ones paying the price of Labor’s high property taxes.
It follows the Victorian Treasurer Tim Pallas’ delivery of the state budget on Tuesday.
“It’s no wonder we’re in the middle of a housing crisis here in Victoria, that rentals are unavailable and unaffordable,” Mr Roswell told Sky News Australia host Peta Credlin.
“In the 53 new or increased taxes in the last ten years under Labor, around half of those have been property taxes.
“You don’t tax something more and make it cheaper – if you tax something more it’s going to get more expensive, and someone’s got to pay for that.
“The people that are paying are often vulnerable Victorians.”
The Victorian Managed Insurance Authority (VMIA) announced the increase in Domestic Building Insurance premiums on Thursday, with the new rates to take effect on August 6.
Builders will face a 65 per cent increase in insurance premiums for both new single dwelling and new multi-dwellings construction projects, while premiums for structural renovations and swimming pools will increase by 20 per cent.
The change means the insurance premiums on a new homes costing $500,000 will increase from $3,872 to $6,388.
This is on top of a 43 per cent increase last September, as well as an estimated $25,000 increase in the cost of building new homes caused the National Construction Code, which came into effect in May.
Victorians are facing a massive increase in the cost of new homes after the VMIA increase building insurance premiums by 65 per cent. Picture: Getty Images
Housing Industry Association’s Victorian Executive Direct, Keith Ryan, said the insurance hike was “yet another blow” for home builders, which would “further undermine housing affordability”.
“It is another hit to an already suffering home building industry in Victoria,” Mr Ryan said.
“It means new home buyers face more fees and charges, with the typical home in Melbourne already paying more than 40 per cent of the cost of a new house and land package in taxes, fees and charges – which is locking thousands of Victorians out of home ownership.
Mr Ryan said that home builders were “already struggling” under the weight of increased building materials and labour costs, and they would be forced to pass the cost of increased insurance premiums on home buyers.
“The housing crisis in Victoria cannot be solved while government agencies continue to impose more costs and taxes on home building in Victoria,” he said.
Shadow finance minister Jess Wilson blamed the increased insurance premiums on the Labor government’s financial mismanagement. Picture: Sky News Australia.
The VMIA’s decision to massively increase Domestic Building Insurance premiums comes after documents released under Freedom of Information had been forced to enact an emergency capital management plan and was seeking a taxpayer funded bailout due to its dangerously low insurance funding ratio – the ratio of insurance claims being paid out compared to the money brought in through premiums.
The public insurer has come under intense financial pressure due to the increase in construction company collapses – as well as a lack of compliance, with some companies illegally failing to take out Domestic Building Insurance.
The VMIA’s insurance funding ratio fell from 131 per cent in June 2021 to 103 per cent in June 2023. If the ratio falls below 100 per cent, the cost of paying out claims will be more than the amount of cash being generated.
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The Housing Industry Association acknowledged the VMIA was facing financial pressures due to the number of insolvencies, but that responding with such large premium increases would “unfairly impose the burden of responding to these claims on home builders and their clients”.
“At a time when the Victorian government is looking to significantly boost housing supply and deliver 800,000 desperately needed new homes over the coming ten years, the industry and consumers need all parts of Government working together to lower home building costs,” Mr Ryan said.
However shadow finance minister Jess Wilson placed the blame for the VMIA’s financial woes at the foot of the Labor government, citing their failure to ensure compliance among builders.
“After a decade of mismanagement under Labor, Victoria’s public insurer is on the financial brink and is now desperately hiking premiums to try and balance its books,” Ms Wilson said.
Sky News host James Macpherson says Australia’s housing crisis needs a “lot of attention” at the moment from the government.
“The government boldly declared that they were going to facilitate 1.2 million homes being built in a five-year period,” Mr Macpherson said.
“That’s lagging, to put it mildly.
“Housing approvals are slow, completions are almost non-existent, all the while we are experiencing a housing shortage.
“The housing crisis needs a lot of attention at the moment too.”
“These premium hikes aren’t about better protections for consumers, but a de facto bailout for the VMIA.
“Instead of punishing Victorians for their own financial mismanagement, the Allan Labor Government must ensure compliance with Victoria’s compulsory domestic building insurance requirements so that every Victorian has the protection they have paid for.”
Shadow minister for home ownership and housing affordability, Evan Mulholland, said the changes meant “each and every home will be more expensive.”
“Home ownership will be out of reach for even more Victorians because of Labor’s incompetence,” Mr Mulholland said.