The government has set a target to build 1.2 million new homes by 2029 and wants lenders to keep pace with changing construction methods.
Prefabricated homes, built in factories then assembled on-site, are becoming more popular as a faster and more affordable option to meet housing demand. These homes require less time to construct and often cost less than traditional houses. While the industry continues to grow overseas in the US, Japan and Europe, adoption in Australia has been slower. Since Labor’s federal election win, the government has held talks with major banks about how to improve financing for these homes.
At present, some banks only offer loans once a prefabricated home is fixed to the land. This means buyers must carry the upfront cost of construction. Earlier this year, Commonwealth Bank changed its policy and began lending up to 80% of a home’s contract value at the build stage, provided buyers choose from a list of approved manufacturers. This change set a new standard and the government is urging other major banks like Westpac, NAB and ANZ to adopt similar practices.
The financial industry appears to be slowly responding but challenges remain. Westpac, the country’s second-largest mortgage lender, has not yet changed its lending model, even while facing a drop in home loan market share. As newer competitors such as Macquarie Bank make gains, embracing modern housing solutions could help traditional banks win back customers.
Australia’s housing minister emphasises that prefabricated building is essential to achieving housing targets. The government has already invested $54 million in developing prefab technology, which is now managed under the housing portfolio. The broader aim goes beyond simply increasing numbers. It is about improving access to more efficient building practices and that will require changes in how banks operate.
