Regardless of whether you are an eco-warrior or not, there are issues with the current construction process. For example, in Australia, the construction and demolition industry contributes an estimated 40% of Australia’s overall landfill yet only 9% of GDP.
Additionally, housing affordability is overwhelmingly low. Whilst land value contributes 50-60% of the purchase price, any avenue to reduce build costs would be meaningful... such as modular homes.
Modular construction for housing is not a new phenomenon. Unsurprisingly, its rise in popularity was bolstered in the 40's-50's following WWII and swift construction was needed.
Despite it's long history, it is still quite niche in both the construction industry and amongst home owners. For example, a 2016 U.S. Census showed that prefab and modular homes made up just 2% of new single-family houses in 2016.
Why modular is yet to take off
So what is the biggest impediment to buying a modular house? Anecdotally, some which come to mind include:
Modular houses were not being sold on a turn-key basis (i.e. buyers had the painful job of buying the land and/or building the foundations )
Buyers know what they want when they see it, but spending hours designing it is a daunting task
Financiers were reticent to lend to this new product given the purchase of the land and the house were seperate transactions
Defects in the product
Misconception that there is a lack of customisation and that modular would not appreciate in value vs. traditional homes
Other operational issues (e.g. defects during transportation)
In the early 2000's cross laminated timber (CLT) solved a lot of the traditional defect issues with modular construction, however, we are yet to see widespread adoption of modular homes.
Where is Australia at in terms of Modular Housing
In Australia, the biggest operator is Modscape and there are exciting new entrants in the market like Dimensions X (led by the founder of Pedestrian Group; Oscar Martin). Generally there is a bigger skew toward Melbourne for this style of housing, amongst the eastern seaboard with Sydney/Brisbane behind on this trend.
In order to obtain more widespread adoption manufacturers need to partner with developers and vice versa (because most of the operators that are integrated across both manufacturing and development are still too small).
For affordably priced modular housing, investors best bet may be to find a developer creating a planned community of modulars as this allows you to get a conventional mortgage. After a down payment(s) to reserve, you ideally won't need to pay until the house is fully built and financing options is provided by the developers.
What is DfMA
The design process is not for everyone. However, if you are willing to buy embark on considering a traditional new-build; the amount of effort in designing a modular home is broadly similar. The advent of design software has fortunately made this process easier
Generally speaking, modular homes manufacturers do not have a large number of pre-designed houses (e.g. Prebuilt has four ranges to chose from) What they do have is complete customisation and this makes the majority of modular orders given that most buyers don't want their house to look homogenous.
Modscape, Prebuilt and others have implemented a Design for Manufacture and Assembly (DfMA) process. This allows customers to design what they want (or think they want) and once chosen DfMA construction reduces on-site construction assembly time by up to 50%* (when compared to its traditional counterpart).
Note:
*From the time of choosing a design through to moving into the home usually takes around 14-18 weeks broken down as follows
• Pre-contstruction phase (not included in build time)
• Factory building phase: 8–10 weeks in factory
• On-site building phase: 6–8 weeks on your land
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