Unlike much of the developed world, Australia’s house building system has yet to mature to the point where it builds housing in factories. In countries such as Japan, Sweden and Germany, prefabricated modular construction accounts for up to 70% of their respective construction industries.
Factories are a means of producing goods more efficiently and precisely. They are effective specifically because they use less resources and include more opportunities to standardise, control and improve than the alternative.
What is that alternative to factories, for housing?
The bespoke manufacture of each house, on its individual site.
This form of bespoke manufacturing of houses is not an efficient model. It is an approach that is difficult to coordinate, relies on labour availability being integrated with materials and with one another, is widely variable, prone to disruptions and interruptions by weather and is no longer fit for purpose.
Even bespoke house manufacturing includes elements of prefabrication, the activities that occur in factories. Concrete is not mixed on site, roofing iron, windows and doors are not made in the backyard and of course, kitchen and other cabinetry and many frames and trusses are pre-fabricated.
But there it ends. The assembly occurs on site and prefabrication is rarely taken to its logical extreme where everything possible is done in a controlled environment or factory. Activities like first fix electrical, installation of weatherproofing, insulation and sisalation, fixing of windows and even plaster are all possible before installation, but are not done for the most part in Australia.
In The Conversation, researcher Lousie Dorignon reported just 5% of Australian dwellings are prefabricated, expected to rise to just 10% by 2030 (others suggest as much as 30%). By contrast, with the aid of Government intervention, countries like Scotland and Sweden have seen prefabrication rise to account for 84% of dwelling construction!
The revolution is underway in Australia. Michael Bleby reported in the Australian Financial Review that Modscape – a prefabricated home builder – is building a specialist factory at the Essendon Airport just north of Melbourne, on a 2 x 15 year lease basis. Bleby says the factory will be 20,000 m2:
“… in which it will install a 120 metre-long line of robots that produce walls and roof components and assemble them into high-end houses as well as modules for commercial-scale build-to-rent housing, student accommodation and hotels.”
Advantages to prefab were reported as being built around the speed of manufacture, where a free-standing house:
“…would typically require a 12-week construction period for the manufacture of components, a one-day installation and then three-to-four week fitout period before the client took possession of the keys.”
With the shorter exposure to risk and cost adjustments, financiers are eyeing off the prefabrication market.
One of the clues to the interest in prefabrication is the extent to which the investors in the housing of the future can also be integrated investors in the manufacturing system for housing.
As the Government’s housing agenda rolls forward and the efforts to build the 1.2 million additional dwellings included in the national plan accelerate, it is clear sophisticated private capital will be engaged more actively than ever before.
Various forms of housing will be rolled out, but most of it will be smaller (like our households), more of it will be low-rise multi-residential in urban infills, much of it will be modular and prefabricated and a significant portion will be for rent on a permanent basis.
Prefabrication is coming and so is a new capital pool that will help drive long overdue efficiencies in Australia’s housing system.
The question for the forestry and wood products sector is whether it will stand by and allow others to dictate the course that will unfold, or whether it can or will engage in new supply chain behaviours and efficiencies to help drive the housing revolution.
The difference between leading and following into this future could well be at what point value is extracted by the sector, and whether it can find a way to share in the upside from the impending prefabricated building revolution.