Certain lenders are now expanding their policies to include construction finance for pre-fabricated (pre-fab) dwellings.
Traditionally, lenders have only financed ‘ground-up’ construction, requiring builders to follow a staged payment structure tied to progress on-site (where the lender has security).
However, with the growing adoption of pre-fab construction – CBA forecasts the sector to triple over the next decade [1] – banks are recognising its viability and are adjusting their policies accordingly.
What This Means for Borrowers
For borrowers, this change means greater flexibility in how construction projects are funded.
Pre-fab construction often involves a significant portion of the work being completed off-site before delivery and assembly.
Under previous lending models, this posed challenges, as banks typically required funding to be released progressively based on on-site work milestones.
The new policies allow for more appropriate funding structures, making pre-fab homes a more accessible option for homeowners and developers.
The Benefits of Pre-Fab Construction
For the right project, pre-fab dwellings can offer several advantages over traditional on-site builds…
- Faster Completion Times: Since most of the construction occurs in a controlled factory environment, weather delays and site-based disruptions are minimised. Once the pre-fab components are delivered, assembly can be completed in shorter time frames.
- Cost Efficiency: Streamlined manufacturing processes and reduced labour costs can make pre-fab homes more affordable than conventional builds, particularly in regions where skilled trades are in short supply and/ or in high demand.
- Consistent Quality: Factory-built components are produced under strict quality controls, reducing variability and construction defects that can occur with on-site building.
- Environmental Benefits: Pre-fab construction tends to produce less waste and often incorporates sustainable building materials and energy-efficient designs.
Why This Policy Change Matters
The shift in policy reflects the growing maturity of the pre-fab industry and acknowledges its role in the future of residential and commercial construction.
With more banks now recognising the legitimacy of pre-fab, developers and homeowners have more financing options (and therefore more construction options) available to them.
Also greater take up of pre-fab should boost efforts to increase productivity in the construction sector amid a push by the current government to build 1.2 million new homes in the five years to 2029.
For borrowers considering a pre-fab project, it’s important to understand the specific requirements of each lender…
Many banks still won’t look at pre-fab at all. Others will have have limitations on the types of pre-fab homes they will finance, or they may require certain conditions to be met, such as lower borrowing percentages (relative to the appraised ‘end values’ of construction), acceptable postcodes, pre-approved builders or manufacturers, etc.
Despite positive signs pre-fab as an industry still has a ways to go in terms of educating consumers around its benefits. There is still a stigma that pre-fab means “quick cheap stuff”.
The industry body is called prefabAUS and they estimate 680 businesses currently operate in the sector. From my research Prebuilt was one of the early movers and they are connected to Pleysier Perkins, one of the preeminent architectural firms in Melbourne.
I’d encourage those interested to do more research/ due diligence but here are some examples from the Prebuilt website, it appears they are producing high-quality products…
Breeze by Prebuilt
Mod by Prebuilt
Habitat by Prebuilt
Eve by Prebuilt
I can’t imagine this working for a complicated period home renovation, but for a new build, and where there are time/ cost pressures, it’s definitely worth a look.
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[1] Australian Financial Review, CBA to offer loans for prefab homes, a sector it once shunned, 31/01/2025
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