Cash strapped developer leaves partly built property in danger of collapse

Partly built properties in Australia are being left in danger of collapse after the credit crunch left a developer unable to continue with the construction work.

A number of buildings on several projects in the capital city, Sydney, are in a precarious position after funding crisis forced developer Citadel Property Group to halt work.

The company claims it has been forced to defer schemes due to lack of funding. Citadel said that Capital Finance Australia Ltd approved £42m for three projects in the city but froze funds after paying only £13m.

The development of a shopping centre and 161 apartments at Berala, a commercial retail unit with 100 apartments at Liverpool and 54 apartments at Rockdale are now in doubt.

It is feared that anchors supporting properties are unsteady as they are reaching the end of their lifespan and some buildings could collapse. It is claimed that the Berala site is particularly precarious and an investment of £430,000 is needed to ensure the safety of the building.

The company has failed to pay subcontractors on these sites and they are considering legal action against it. Citadel is trying to sell off assets to meet these commitments.

In turn, Citadel is suing Capital in the Australian Supreme Court, claiming a breach of contract.

It is a sign of the times in Sydney where the number of postponed projects have grown fivefold since this time last year. In 2008 so far, 5,048 projects have stalled, compared with 1,052 projects in the first 10 months of 2007. More than half of these projects are in north-west Sydney.

Master Builders Association chief economist Peter Jones said the construction industry was suffering a loss of confidence and developers were finding it harder to access finance. 'This shows how the credit situation is choking off projects,' he said.