Jessica Satherley 10 Jan 2020

Gerald and Sally MacRae from Lorneville, Southland, bought a prebuilt home and love it

Prefabricated houses are a booming industry in New Zealand because of their cost efficiency and high-quality builds.   

REDnews has put together a guide to answer the common misconceptions surrounding prefabs: 

  1. What are prefab houses? 
  2. Why choose prefab? 
  3. The risks of prefabs 
  4. Are prefab homes cheaper? 
  5. Are prefab houses safe? 
  6. How to finance a prefab home 
  7. Where do you buy a prefab home? 
  8. Can prefab homes be added to? 
  9. Who is leading the way in prefab housing? 
  10. How long do prefab houses take to make? 
  11. Can commercial buildings be prefabricated too? 
  12. Mixing traditional building methods with prefab manufacturing 
  13. Inside a couple’s experience with a prefab home 


What are prefab houses  

Prefabricated homes are manufactured offsite in advance, that is, not built on the land where they will sit once completed.  

That refers to a single component or complete building that is made away from the final building site. 

Once the manufacturing phase is complete, usually in a factory, the house is moved to its destination via truck.   

“The key problem with prefabricated homes is that they’re called ‘prefab’, and there's a connotation to that, that means cheap and poor quality,” Westpac’s Senior Manager of Credit Strategy and Policy Heiko Jonkers says. 

“Whereas that is not the case.  The quality of prefab homes has gone through the roof, the materials and designs these days are incredible. 

"They are cost effective and quicker to build than a traditional house because you can use factory processes.  

“People associate prefabs with state houses or a third form classroom, which used to be uninsulated and made with cheap construction, but the prefab industry has moved miles in recent years,” Jonkers says.   


Why choose to buy a prefab home? 

“On average, purchasing a prefabricated house can potentially save 15%,” Jonkers says. 

That would be a saving of $32,000 for a 157m2 house as well as a time saving, as 60% of construction time can be saved due to the off-site construction. 

The reason for the cost savings is down to the factory production line techniques. 

“It’s like a Toyota Corolla. Thousands are built in the factory at one time, which keeps the cost down – instead of taking the materials to a client’s home and building them one by one,” Jonkers says. 

Design features have come a long way in recent years too, so it’s possibly to have a stylish well-built home, which is not a repetitive design. 

In light of New Zealand’s housing shortages and population growth, prefabs offer a high-speed, low-cost method of building without compromising quality. 


What are the risks of buying a prefab home? 

The only difference between off-site construction and traditional on-site construction is that if the prefab builder goes into liquidation, the customer doesn’t have automatic control over their house. 

Jonkers says that Westpac counters this risk for its customers by creating a legal agreement that allows and enforces access to the site in the case of the builder going into liquidation. 

“We also develop an insurance guarantee product that allows for offsite building and transport cost overruns to protect the customer. 

“And we limit the pool of acceptable prefab build partners to Westpac main bank customers, thereby providing insight into credit strength,” he said. 

“The Government is also working to improve occupational regulation within the sector and to address issues of risk, insurance and liability.  Announcements are expected in 2020,” Building and Construction Minister Jenny Salesa said in a recent press release


Are prefab homes cheaper? 

The short answer is yes, prefabs are potentially more cost-effective for an equivalent-sized house.   

It’s not only the factory-line production that can save on average 15% on construction costs, but there are other savings from the prefab model. 

“There are labour savings from the builders working at the factory, instead of having to commute to each off-site location. 

“And there are material savings from cutting timber efficiently in the factory,” Jonkers says. 

However, the overall cost savings depend on the specifications of each home and the location that the house will be delivered to. 

A three-bedroom, two-bedroom prefab home measuring at 130m2 could cost approximately $206,700. 

While a four-bedroom, two-bathroom house measuring at 317m2 could cost an estimated $437,000. 

Are prefab houses safe?  

“Prefabs are absolutely safe, and they are built to building codes,” Jonkers says.   

“The materials have to stand up to being transported so the cladding is usually timber, or long run steal, but that is standard in the New Zealand housing market. 

“Structured insulated panels are also possible,” Jonkers says. 

Building and Construction Minister Jenny Salesa recently announced that more safe homes can now be built quickly through prefab manufacturing. 

“Every New Zealander deserves a warm, dry, safe home and old inefficiencies in the Building Act make building slow and expensive,” Salesa said in a press release

“We are making progress in tackling the long-term challenge of housing including making high quality, large-scale manufacturing of prefab houses a reality,” she said. 

The minister’s initiative is streamlining the nationwide consenting process for prefab buildings that enables mass factory production of high-quality buildings and will half the number of building inspections required. 


How to finance a prefabricated home  

A prefab mortgage does differ from a traditional mortgage, which uses the property law act and land as an attachment to its framework. 

“Westpac has developed a funding product that takes security over the prefab while it is being built in the factory,” Jonkers says. 

"This allows the customer to fund it while it’s being built.  

“Historically customers needed to fund the build with its own equity to complete the build and traditionally banks only funded the prefab once it reached its end site,” he said. 

The buyer can receive a standard construction loan product assessed under normal criteria, without any unique credit risks being in play. 

Westpac NZ was the first New Zealand bank to launch a dedicated mortgage product aimed at helping Kiwis into prefabricated. 

Westpac Prefab launched in July 2019 and since then there has been an increasing interest from prefab businesses and customers. 


Where do you buy a prefab home? 

Some of the companies providing prefab homes in New Zealand include Lockwood HomesBranderson HomesBuilt SmartExceed homes, and Precision Built.  

Prefab NZ is also a local organisation that provides information on the latest updates in the prefab construction industry. 

“In some countries, nearly 80% of newly built homes are prefabricated offsite, in New Zealand it’s about 10%,” Building and Construction Minister Jenny Salesa said. 


Can prefab homes be added to? 

This depends on the home.   

Once the prefab is onsite it’s like any other home, so it depends on the build. 

Both a single component and a complete building is classified as a prefabrication as long as it’s made away from the final building site, a government press release states

Therefore, if your prefab home is able to be added to with an extension, the same rules apply for any building, meaning you may need planning permission. 


Who is leading the way in prefab housing? 

In Sweden, around 84% of houses are using prefabricated structures, according to Forbes

Germany’s housing market is around 20% prefab homes and Japan’s is more than 15% prefab builds. 

Europe is leading the way in this field though and has been manufacturing prefabs for decades. 

“The market is more developed in Europe, where there are established factories that have been around for 40 years,” Heiko Jonkers says. 

“Building in the factories is an advantage in severe weather events or if you live in an area with a labour shortage,” he said. 

“Construction in a factory, in a protected environment and with sophisticated equipment, helps to create a more energy efficient house,” Forbes said. 

“Many homeowners are building their homes to Passive House standard (first originating in Germany) as a means of being insured they will be getting a very efficient and comfortable house,” the magazine said. 


How long do prefab houses take to make? 

“The time frame of completion depends on each design specification but it’s quicker than building on-site,” Jonkers says. 

"For example, it could take six to eight weeks for a standard prefab design to be build, but 12 weeks for a more complicated design,” he said. 


Can commercial buildings be prefabricated too? 

Prefabricated buildings can certainly be used for commercial constructions too. 

“Commercial Bay in Downtown Auckland was a prefab from Whangarei,” Jonkers says. 


Mixing traditional building methods with prefab manufacturing 

Housing New Zealand has been recognised by the Property Industry Awards for two of their apartment complexes in Auckland, which combined prefabs alongside traditional building methods. 

“It shows that our homes can be of equal or better quality, and design standards, than homes built on the private market,” Housing NZ Construction Group General Manager Patrick Dougherty says. 

“These developments are also a reflection of how we are employing components of off-site manufacturing alongside traditional building methods to deliver more homes for Kiwis in need,” he said. 

Housing NZ has also been working on reducing construction programmes by up to half when delivering off-site manufacturing. 

“We have used off-site manufacturing for many years – particularly during the Canterbury rebuild and Right Size programme, where smaller houses were extended to accommodate larger families. 

“In 2016, an off-site manufacturing panel was established with tailored contracts, which has been contributing to our increasing use of off-site manufacturing,” they said to Build Magazine


Inside a couple’s experience with their prefab home  

“We are absolutely loving our prebuilt home,” Gerald and Sally MacRae from Lorneville, Southland, say. 

“We chose it over traditional on-site construction because it was faster to build, more affordable, and left us with a smaller range of decisions to make. 

“Our house is 134m² which is big enough for the four of us, and it’s just a really good design.  

“The living room, dining room and kitchen are open plan so it feels bigger than it is, and there’s very little wasted space.  

“It’s energy efficient and amazingly warm, which is pretty important for a Southland winter. 

“Considering we were all new to the process, Westpac were great to deal with.  

“Jason Hughes from their Invercargill branch was awesome - very helpful and patient. 

“Our two kids love the place as well. The novelty of living in a brand-new house hasn’t worn off for any of us, and probably won’t for a long time yet,” the Westpac prebuilt customers said.