A factory in Vietnam may solve international housing crisis
MELBOURNE: Building modular housing for troops in Afghanistan taught Terry Gordon how to construct sturdy units quickly and cheaply. It’s also given him a solid foundation for the ambitious expansion he plans for the company he founded last year, by setting up a prefabricated home factory in Vietnam.
“I want to do for the housing industry what Henry Ford did for the automobile industry, and that’s do it at scale, discipline manufacturing and roll it out to the masses,” said Gordon, who heads Modular Construction Masters.
“We build aircraft, cars, medical equipment and all technology in factories except our homes. We’ve got to change the way we look at things,” he said.
Tackling the national supply shortage by building new homes faster is a key part of the solution to the affordability crisis, analysts say, with hopes that new building techniques, including prefabrication, can play a part. The emerging sector was given a boost last year when the Commonwealth Bank began offering loans for such products.
MCM is embarking on a $US30 million ($42 million) raising, led by Eaglehawk Capital’s Tony Newham, to start a modular home factory in South-East Asia.
Gordon says his company can build homes twice as quickly as traditional construction methods by building custom-designed module homes – ranging from granny flats to apartment buildings up to 12 storeys – in Ho Chi Minh City and shipping them to Australia.
The first phase of the capital raising will seek $US4 million to allow MCM to build prototypes and its first 216 modules over the next 18 months.
The second $US26 million will help MCM establish the factory to produce modular homes at scale and ship primarily to Australia and New Zealand, then to North America.
After four years of operation, MCM aims to build 1500 apartments each year (3000 modules) by designing homes in Australia, building them to national standards in an assembly-line style, and shipping them on vessels usually reserved for grain and iron ore.
Australia behind on modular building
Australia has been relatively slow in its uptake of modern building methods – which shift more of the construction process to factories and include modular housing. Here, those methods account for about 5 per cent of total construction, compared to Sweden (84 per cent), the United Kingdom (16 per cent) and Japan (12.6 per cent), according to Ray White.
Australia is expected to fall at least 200,000 homes short of the national target of delivering 1.2 million new homes over five years, according to a Master Builders Australia forecast last month.
“Australia still needs a rapid dismantling of supply barriers and an increase in building approvals that will stimulate the civil, residential and non‑residential pipelines and fight back against housing inflation,” MBA chief executive Denita Wawn said.
Some of the solution could lie in a broader shift from site-based home builds to factory-built housing, Ray White’s chief economist Nerida Conisbee said.
“The challenge is not in the [home building] target itself but in the capacity to achieve it. The workforce required to reach that level of output simply doesn’t exist,” she said.
“The Housing Industry Association estimates that meeting the national target would require an increase of about 30 per cent in skilled trades. That’s before accounting for retirements or workers leaving the industry. Even with record migration, faster training and higher participation, that kind of growth is implausible,” she said.
Builds for essential workers
Traditional building works in a linear approach: preparing the site, pouring a slab and then beginning to build. MCM’s prefabricated building system allows 95 per cent of the home build to be done in a factory while the civil site is being prepared, saving time and money, according to Gordon.
“I see a lot of value in the higher-density products, residential apartments, and affordable housing accommodation for essential workers. With the rezoning in some metro areas, we have the opportunity to build quality and quickly, and then student accommodation as well,” Gordon said.
Early signs are emerging of a pick-up in investment in new builds following Labor’s tax shake-up in the federal budget, abolishing negative gearing and the capital gains tax discount for investors in existing homes while maintaining the concessions for new builds in May.
Figures from mortgage broker agency Loan Market show one in every 14 investor loan applications has been for new builds compared to one in 19 before the May budget announcement.
After five years of house price growth outpacing wage growth, affordability remains a challenge for prospective buyers despite current weakness in the Sydney and Melbourne markets.
The average loan size for first home buyers has increased from $426,000 to $614,000 (a 44.3 per cent increase) over the last five years, according to Loan Market.
Loan Market broker Steph Thomas said the low levels of supply are leading to more competition at the lower end of the market.
“Increasing supply could directly help first home buyers by reducing competition and providing more housing options within their price limits,” Thomas said.