Could factory-built homes help Australia build housing faster?

Building the home faster is only part of the challenge

With Australia looking to deliver 1.2 million new homes by 1 July 2029, one part of the housing industry is trying to shift more construction from building sites to factory floors.

PrefabAUS – Australia’s peak body for prefabricated and offsite construction – says prefabricated homes can be completed faster than a traditional build. That shorter construction timeframe could help accelerate Australia’s progress towards the housing target.

At prefab builder Anchor Homes, Managing Director Lester Raikes said the design, documentation and planning phase can still take months depending on the project. But once a contract is signed, the factory build itself typically takes between eight and 12 weeks, with some site preparation happening at the same time. 

“With our build process, we’ve had customers move into their new home within months of signing their contract,” Raikes said.

While prefab can reduce the time spent physically constructing the home, these projects still require planning, approvals and usually, financing.

Traditional building contracts haven’t been designed around the way prefab homes are manufactured and paid for.

A prefab home can be manufactured largely offsite, transported by truck and assembled on the buyer’s land. Traditional building contracts, however, have been designed around construction progressively taking place on site. 

That mismatch is the target of a new industry-wide standard form contract launched by PrefabAUS and developed through sponsorship by CommBank.

The contract is available to builders, manufacturers, customers and lenders regardless of which lender provides the finance, and is designed to align payment stages with the way prefab homes are manufactured and delivered.

PrefabAUS Executive Chairman Damien Crough said existing arrangements had been one of the barriers to wider adoption.

“For too long, prefabricated construction has been constrained by contracts designed for traditional, site-based delivery,” Crough said. 

“This new standard form contract provides the clarity and structure needed to better support how these homes are delivered, which can help unlock investment, improve productivity and assist in scaling the growth of the modern construction industry in Australia.”

So how does a prefab home actually work?

Prefab, or prefabricated, housing covers homes where much of the construction happens away from the final site.

At Anchor Homes, modular homes are built as separate sections in a factory before being transported by truck and joined together on site.

The modules can be up to 18 metres long, with larger homes made from multiple sections.

“It just goes together very simply like a Lego block,” Raikes said.

Factory construction can also reduce exposure to weather delays, although some work still needs to happen on site.

“That exposure to the elements is reduced so much, and that also obviously brings in a lot of efficiency,” Raikes said.

Why financing has been a sticking point

Prefab homes are built differently, which means they also need to be funded differently.

Traditional construction finance generally releases payments as work is completed on the customer’s land. With prefab, much of the home is manufactured offsite, so manufacturers need to be paid progressively before the finished home is delivered.

Until now, this mismatch has created uncertainty for buyers, manufacturers and lenders. The new standard-form contract helps address this by defining payment stages aligned to key manufacturing milestones, providing greater clarity about when payments are due and what has been completed at each stage.  

CommBank Home Buying General Manager Rebecca Markwell said modern methods of construction could help deliver homes faster and more efficiently.

“We’ve already introduced changes to our lending policy to better support prefabricated housing, including enabling progress payments during the offsite construction phase,” Markwell said.

“Working with the industry to support innovation in construction and remove barriers for adoption of modern methods of construction, including sponsoring the development of a standardised contract, is all part of how CommBank is supporting the delivery of more housing supply to the market.”

Raikes said changes to finance had already made a difference for customers.

“There was always a question mark over financing a build, and obviously it’s one of the most important factors,” he said.

“To have one of the big four banks come forward and support it and come up with a product that’s fit for purpose has been a game changer in terms of client confidence.”

What prefab homes actually look like

One of the misconceptions Raikes encounters is that modular homes resemble the portable buildings people may remember from school.

“A lot of people my age and older might have grown up in a portable classroom. For some reason, that’s the first thing we think when we think modular,” he said.

But Raikes said modular describes the construction method, rather than a temporary building designed to be moved around. 

“These buildings aren’t portable. They’re modular build,” he said. “The intention is for these homes to be fixed permanently on their footings.”

He said factory construction also allows greater supervision throughout the build.

The homes themselves don’t necessarily look modular either.

Anchor Homes offers dozens of starting designs, while Raikes said about 60 per cent or more of its homes are variations on a standard plan and others are fully custom designed. 

One recent home at Apollo Bay on Victoria’s Great Ocean Road arrived in four or five large modules.

“Unless you saw that being craned in on the day that was installed, you would have no idea that arrived on the back of the truck,” Raikes said.

Does prefab mean cheaper?

Not necessarily. 

Raikes said another misconception is that factory construction automatically means a dramatically cheaper house.

“A lot of people think a modular home is cheap. I wouldn’t say a modular house is cheap, I’d say affordable. But they still have everything in them that a standard build has,” he said.

“They’re not going to come to the market at 50 per cent of the price of a traditional build.”

There can, however, be savings elsewhere. 

For knockdown rebuilds, Raikes said manufacturing can begin while the owners are still living in their existing home. That can significantly shorten the period they need to live elsewhere while their old house is demolished and the new one installed.

“When you look at your cost of displacement, of moving out of your current home, moving into a rental property for 12 months, all the additional moving costs that come with that, it’s actually a massive cost saving,” he said.

Why regional Australia could benefit

Prefab can have particular advantages where builders and trades are difficult to find. 

Raikes said Anchor Homes sees strong demand in regional Victoria and New South Wales.

In some regional areas, he said local builders can have years of work already ahead of them.

Modular construction allows around 80 to 90 per cent of a home to be built elsewhere, with the remaining work completed on site.

“That’s where the modular benefit really does start to amp up, because we can build a house where there’s population and build 80, 90 per cent of that off site, and then just do that small 10, 20 per cent on site,” Raikes said. 

He pointed to the Snowy Mountains as one example where finding a builder can be difficult despite pent-up demand.

Raikes said prospective customers had told him local builders were doing good work but already had three or four years of projects ahead of them.

What could determine how far prefab goes

PrefabAUS says prefabricated housing remains a small part of Australia’s market, but sees significant potential as the country works towards delivering 1.2 million new homes by 1 July 2029. 

Raikes believes prefab could play a bigger role in addressing housing supply because homes can be manufactured at scale and with less reliance on labour being available at the final site.

“Prefab homes definitely can help solve Australia’s housing shortage,” he said. “The reality is that we can build at scale and we can build at scale quickly.”