Metricon’s 20 day pilot showed the assembly works. Building thousands of homes a year in factories depends on three things still catching up: steady orders, finance that follows the factory, and approvals built for it.

Two homes in 20 working days.

That was the number attached to Metricon’s prefabricated pilot at Stockland’s Mt Atkinson Estate in Truganina, in Melbourne’s west, in July. Around 90 per cent of each home was made in a factory as wall panels, then assembled on a conventional slab.

It proved the assembly works. It did not prove the model scales.

That is the question now sitting under every prefab announcement. Not whether a factory can build a good home, but whether it can build thousands of them, every year, without running short of orders, finance or approvals.

Australia still builds very little in factories

The same report sets Australia against other markets. Around 95 per cent of new conventional multi dwelling buildings in Sweden in 2023 were prefabricated. In Germany it was 26.1 per cent of new single and duplex houses in 2024, and in Japan 11.75 per cent of new dwellings.

Governments care because of productivity. The Productivity Commission found the number of dwellings completed per hour worked in housing construction has fallen 53 per cent since the mid 1990s. A broader measure that allows for bigger, better homes fell 12 per cent.

Factory production is one of the few levers that changes how labour is used, rather than asking more of a stretched workforce.

The first barrier to scale is steady demand

A factory is a fixed cost. It needs orders every week, not a rush of them in a boom followed by silence.

The ABCB analysis is direct about this. It identifies lack of demand as one of the largest barriers to prefab uptake, and says that without pipeline certainty, manufacturers may be reluctant to invest in the scale needed to bring costs down.

The United Kingdom shows what happens when that goes wrong. A House of Lords committee inquiry in 2023 and 2024 examined why a number of modular housing manufacturers had gone into administration or halted production.

In Australia, the steadiest buyer right now is government.

Queensland’s QBuild factory at Portsmith in Cairns has completed 30 modular homes since manufacturing began in 2024, and the state is lifting its annual production by 40 per cent from 1 July 2026.

Victoria reports more than 70 modular social homes delivered across regional areas, 136 under construction and more than 350 due by mid 2028. In Western Australia, the ABCB analysis notes $49 million awarded through the state’s Housing Innovation Fund to modular and prefabricated manufacturers.

Social housing gives factories repeatable designs and predictable volume. It is also a narrow base on which to build an industry.

The second barrier is how construction finance works

Construction loans were designed around a builder working on the client’s land. The bank releases money at stages it can see, and the land and the work on it are its security.

Prefab turns that around. Most of the money is spent in a factory, often a long way from the block, before anything arrives on site. The ABCB analysis notes that progress payment models built around inspection stages do not align well with offsite manufacturing, where more finance is needed upfront.

The same analysis records that until the Commonwealth Bank changed its approach in January 2025, its prefab customers could be required to fund up to 90 per cent of upfront costs themselves.

Under CBA’s current policy, buyers using a manufacturer on its assessed list can draw up to 80 per cent of the build contract while the home is built offsite, capped at 150 per cent of land equity. For other manufacturers the limit is 60 per cent, or 120 per cent of land equity. The bank notes that the land is the sole security until the home is transported to site, which can leave a borrower in negative equity if the manufacturer fails before the home is affixed.

Its assessed list is revealing in another way. It currently shows manufacturers based in Victoria, Queensland and Western Australia, and none based in NSW, the ACT, South Australia, Tasmania or the Northern Territory.

Tasmania is testing a different fix. Its draft Modular Housing Finance Guarantee Bill 2026 would have the state guarantee construction loans while homes are built offsite, with the guarantee reducing as work progresses and ending once the home is installed. Consultation closed on 4 September.

For builders, finance timing reaches well beyond the client’s loan. It shapes deposits, claim schedules and how cash flow runs across a job when much of the value sits in someone else’s factory.

The third barrier is an approvals system built for site inspections

Mandatory inspections assume someone can walk the frame on site. When the frame was built and lined in a factory, that model strains.

The ABCB’s proposed national certification scheme would certify a manufacturer’s systems, from quality management and traceability to workforce competency, rather than inspecting each unit. Under the draft, mandatory inspection stages would not apply to factory work by certified manufacturers, but only subject to legislative change. Work on site would stay under existing building regulatory systems. Consultation closed on 15 September, and the scheme is intended to commence by mid 2028, a date the ABCB describes as indicative.

NSW has moved ahead on its own. Its Building (Approvals and Practitioners) Act 2026 passed Parliament in August and recognises prefabricated buildings in law, setting obligations across manufacture, supply, transport, delivery and installation. The supporting regulations are still being developed.

Certification alone will not carry the industry

This is the detail worth sitting with. The ABCB’s own analysis says the scheme will not resolve every barrier. It names market demand, finance, insurance, procurement, supply chain capability, consumer confidence and state implementation as factors shaped by broader settings.

Its modelled savings per home are also modest. With a contingency applied, the estimated inspection saving per Class 1 dwelling ranges from $249 in the ACT and $307 in Victoria to $3,537 in Queensland. Under the central case, a mature volumetric manufacturer would need to build 36 Class 1 buildings a year before participating pays off.

That is not a case against the scheme. Consistent rules give lenders, insurers and certifiers something to rely on. But it is one link in a chain, not the chain.

Certification is one link in a chain, not the chain.

Panelised versus volumetric prefab

Volumetric construction makes complete three dimensional modules, often fitted out with services and finishes, which are transported and craned into place.

The ABCB draft scheme would cover both, along with prefabricated whole buildings, for Class 1 and Class 2 buildings.

What scale is likely to look like for builders

Scale will not look the same everywhere.

Panelised systems like the one in the Metricon pilot sit inside the way builders already work. The builder still runs the slab, services, site and handover. Volumetric modular moves far more of the job into the factory, and the manufacturer is often the builder as well.

Either way, the site work does not disappear. Footings, connections, craneage, services, finishes and defects still need people who know what they are doing, and someone accountable for the join between factory and block.

The pilots have done their job. The next test is less exciting and far more important: repeat orders, finance that follows the work, and approvals that recognise a certified factory. Where those three line up, prefab grows. Where they do not, expect more pilots.

The Good Builder Take

Prefab will not arrive in residential building like a switch being flipped. It is arriving job by job, through panels and frames that fit inside existing businesses, alongside factory built homes in the social housing programs governments are funding.

The useful way to think about it is not factory versus site. It is where the money sits, who signs off what, and who carries the risk at the join between the two.

Three signals will show whether the industry is genuinely scaling: private buyers placing repeat orders, more lenders funding the factory stage, and states legislating to recognise certified manufacturers once the national scheme lands.

For more conversations with the builders and manufacturers working through these questions, listen to The Good Builder Podcast and follow us for our coverage of the national certification scheme as it moves toward 2028.

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Related articles

• Metricon Built Two Prefabricated Homes in Twenty Working Days. The Industry Response Has Been Mixed.
• The Prefab Certification Scheme Has Moved From Idea to Draft Rules
• NSW Rewrites the Rules on Building Approvals and Prefab Homes
• Australia’s First Prefab Installation Qualification Is Now Being Taught

Last updated: 26 October 2026. Lender policies and government program figures are current at that date.

General Information Only. This article is intended for general information purposes only and does not constitute legal, financial, or professional advice. Laws, regulations, and industry requirements vary by state and territory and change over time. Builders and trades professionals should seek independent advice relevant to their specific circumstances before making business, legal, or financial decisions.