Are Prefab Homes the Future for Homeownership?

Australians have a long standing tradition of owning their own homes. Governments have actively encouraged citizens to purchase property since the loan schemes in the 1920s. While figures for home ownership in Australia indicate that 67% of households are owner occupiers, there has been a steady fall in the number of people that own their home outright, from 40.9% to 32.1%. Figures for households that own their home through a mortgage has increased from 25.5% to 34.9%.

Perhaps the biggest attraction to home ownership in Australia is security of tenure. With a rental system that leaves tenants uncertain and anxious, many choose instead to purchase a home to provide surety for families. This of course, coupled with the financial benefits of home ownership makes it a very attractive proposition. However, as prices continue to rise, the market is skewed firmly in favour of those already on the property ladder. Minimal rates of capital gains tax, as well as the possibility for negative gearing can lead to home ownership being an extremely profitable asset for those who invested before prices started to increase drastically.

Increasing Prices

Housing prices in Australia have seen significant increases in the last year and a half. Sydney in particular has seen a dramatic increase, with prices increasing by 13.1% in 12 months. While there has been a slowdown in the eight capital cities from the previous 12 months, there was still a 6.9% growth in prices across the board. These increases have led to 49% of Western Australians believing that home ownership is no longer feasible or realistic. In the Northern Territory, residents have an even more pessimistic outlook, with 62% believing that owning their own home is unachievable. Tasmanians were the most realistic, with only 38% of residents believing that home ownership is not a viable option.

The worry for Australians now is that consistently increasing prices will become unsustainable and that a sharp decline will eventually occur, similar to the property bubble that took place in Ireland in the 2000s, where house prices fell by up to as much as 56% compared to peak levels in 2007. When this takes place mortgages can be left in arrears, and home owners can experience negative equity.

What are the Alternatives?



  • Renting offers a viable alternative for those that see home ownership as an unrealistic ambition.
  • Affordability and lack of responsibility with regard to maintenance of the property are appealing prospects.


  • Lack of security is a deterrent for many.
  • Owners can ask tenants to vacate the property provided sufficient notice is given.
  • Tenants can incur penalties should they vacate the property during the lease.
  • It is also highly likely that there will be rules as to how the property must be used and treated.

Prefabricated Homes

Growth in the prefabricated homes sector is estimated at 5% per annum until 2023. At present the sector accounts for just $4.6 billion of the $150 billion dollar construction industry. However, in a time where housing prices continue to increase and mortgages become unattainable for many, prefabricated homes may offer the perfect solution to the problem. The cost savings that can be made by choosing prefabricated home ownership can result in a reduction in the income necessary to attain a high ratio mortgage.


  • Shorter construction time- Where regular houses can take over a year to build, prefabricated homes can be ready in a matter of months.
  • Prefabrication costs will be cheaper than conventional construction costs.
  • Factory builds are not affected by adverse weather conditions.
  • Factories tend to have better building equipment as opposed to regular building sites.
  • Many trades can work together to improve efficiency.
  • Construction can begin while a building permit is being processed, thus eradicating the chance of protracted building costs.
  • Excellent quality control mechanisms exist in factories and are generally superior to conventional building sites.
  • Workers tend to have access to more technologically advanced tools, which can result in a better finish for your home.
  • Estimating the total cost of construction can prove easier in a controlled environment.


  • Completed homes need to be transported on the back of a truck, and costs can increase depending of the difficulty of moving a home to its final location.
  • Factory floor space needs to be rented and can be expensive.
  • Buildings must adhere to size restrictions due to road width and height laws.

There are certainly many cost benefits with regard to purchasing a prefabricated home. Emphasis on sustainability has also increased, making the factory build option attractive due to decreased utility costs, with many using solar panels and even grassy plants as roof insulation to help the environment. Perhaps the greatest stumbling block at present is the difficulty in attaining a mortgage until the work is completed. Therefore, a construction loan may be necessary to pay the builder while the home is being created.