Financing Prefabricated Homes: How Lenders Are Adapting to a Changing Market

A prefabricated (or prefab) home is a dwelling constructed off-site in a factory setting before being transported and assembled at its final location. Unlike traditional homes, which are built from the ground up on-site, prefab homes leverage advanced manufacturing techniques to streamline the construction process, reducing both time and waste.

Prefab homes generally fall into two main categories: modular and panelised. Modular homes are built in large sections - sometimes entire rooms - before being delivered and assembled like building blocks. Panelised construction, on the other hand, involves prefabricated wall, floor, and roof panels that are put together on-site. Both methods offer significant advantages, including faster build times, reduced costs, and greater quality control, as construction takes place in a controlled environment.

Historically, prefab homes were associated with low-cost, mass-produced housing, but modern advancements have transformed the sector. Today, they range from affordable housing solutions to high-end, architecturally designed residences, incorporating cutting-edge sustainability features such as solar energy, high-performance insulation, and passive design principles. As demand for faster, more efficient, and environmentally friendly construction grows, prefab homes are increasingly becoming a mainstream solution to housing shortages and affordability challenges.

The state of the industry today

Despite their advantages, prefab homes remain a small segment of the construction industry due to financial, regulatory, and market perception challenges. Traditional lenders have been hesitant to finance prefab builds, as most of the construction occurs off-site, limiting the security of progress payments. Regulatory frameworks often favour conventional methods, making approvals complex and inconsistent. Additionally, high upfront costs for manufacturers, transport limitations, and the stigma of “cheap, low-quality” prefab homes deter widespread adoption. The industry also requires scale to be cost-competitive, meaning many developers struggle to make it viable without large, repetitive projects such as social housing or student accommodation.

The Players In The Australian Market

Modscape: Specialises in innovative, sustainable modular homes and commercial buildings.

Ecoliv: Focuses on eco-friendly, energy-efficient modular homes with a commitment to sustainability.

Prebuilt: Offers architecturally designed prefab homes and commercial projects, emphasising intelligent and ethical construction.

Archiblox: Provides sustainable, prefabricated modular homes and commercial spaces, integrating modern design with environmental consciousness.

Anchor Homes: Delivers high-quality modular homes across Victoria and southern New South Wales, known for innovative design and efficient construction.

6Homes: Designs and delivers luxury modular homes with a focus on affordability and customisation.

Prefabulous: Builds architecturally designed modular houses, offering a range of studio to multi-bedroom homes with an emphasis on affordability and sustainability.

Arkular: Curates sustainable prefabricated architectural modular homes tailored for various environments, from rural to urban settings.

Major shift in prefabricated home financing

Lenders

Traditional lenders have been reluctant when it comes to prefabricated home financing because most construction occurs off-site, limiting the security of staged progress payments tied to on-site value. The risk of manufacturer insolvency mid-project also discouraged financing. Additionally, prefab’s historical association with low-cost, lower-quality builds reinforced hesitation. However, this perception is shifting as major banks like CBA develop tailored prefab loan structures, recognising faster build times, reduced cost overruns, and improved quality control. Stronger industry regulations, standardised contracts, and pre-approved manufacturers are further reassuring lenders, making prefab financing more accessible and mainstream in the housing market.

Regulators

Regulators are easing prefab home financing by standardising contracts, streamlining approvals, and encouraging lender participation. The Albanese government has introduced a voluntary certification system to simplify regulatory approval, while banks and institutional investors are working to remove financing barriers. Prefab-specific lending models, like CBA’s tailored loan structures, are emerging, offering higher pre-attachment lending ratios for accredited manufacturers. The government’s Housing Australia Future Fund (HAFF) and National Housing Affordability Fund (NHAF) also support prefab adoption, particularly in social and affordable housing. These measures are helping integrate prefab into mainstream construction, reducing risk for both lenders and buyers.

Equity Growth & Resale Value

Prefab homes will appreciate similarly to traditional dwellings when permanently affixed to land. While past stigma affected resale value, modern prefab designs offer high-quality, energy-efficient homes that will attract buyer attention. As market acceptance grows, well-located prefab properties are increasingly competing with conventional homes in terms of long-term equity growth.

Depreciation Risks

Historically, prefab homes were seen as depreciating assets, especially if not affixed to land. However, modern homes meet high construction standards, ensuring durability and market competitiveness. As perceptions shift, prefab homes are proving to be long-term investments, challenging the outdated view that they function more like temporary structures.

Lender Confidence & Financing Impact

Lenders were once hesitant to finance prefab homes due to off-site construction risks. However, major banks now offer prefab-specific loans, improving market confidence. Enhanced regulatory frameworks and sustainability benefits further support prefab housing as a viable, appreciating asset, making it increasingly comparable to traditional homes in financing and long-term value.

Should you buy one?

Well… let’s just say the answer isn’t no. It’s more like it depends. If you’re working with an existing structure, your options are naturally limited. While factory-built extensions do exist, your architect can advise on feasibility. But for a full build, prefab is definitely worth considering.

That said, the industry is still evolving, particularly for the mass market. New manufacturers will emerge, and some will disappear, researching the right builder might be more challenging than finding a conventional one. On the bright side, there are fewer to compare.

My advice? Start with prefabaus.org.au. Speak to the companies mentioned earlier (listed in no particular order or endorsement, I should add), visit trade shows, and check out the factories yourself. Most prefab builders are more than happy to answer questions and walk you through their process. Don’t be shy - ask the tough questions and see how they work.