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InteriorInterior
21 June 2018

Finance Options for Prefab Home Buyers

prefab building 2

PrefabNZ, the industry body for innovative construction, has over 300 member businesses that have three key areas of need — procurement at scale, good offsite consenting guidance, and better bank finance.

The government’s KiwiBuild programme is addressing procurement at scale. PrefabNZ has made a start at improving the consent process through the Good Offsite Guide v.1 (March 2018), and Better Bank Finance programme (since 2014). Progress to date can be seen on the PrefabNZ website.

There is now urgent need for complete, refined and well-communicated answers to bank finance in order to deliver KiwiBuild housing at scale and at pace. PrefabNZ is working with several major banks and finance professionals to bring about simple solutions that enable:

  • First-home buyers to purchase a transportable house using a traditional mortgage
  • Residential clients to access a multi-year builders warranty that guarantees the deposit and defective work
  • Commercial clients to utilise prefabricated panels and pods without secondary finance

On May 8 2018, Westpac announced their finance package for home purchasers of transportable housing — see more at their website here.  Other banks will be coming on board with their packages in coming months (keep an eye on that here). 

Our Offsite Industry Context:

Today’s global construction industry is transforming at very fast rate. This is driven by the four forces: digitisation, industrialisation, globalisation and sustainability. Overlaid on these forces are demands for higher levels of resilience and compliance. 

Supply Chain Structures in Construction

Adjunct Professor David Chandler (OAM FAIB) at the Centre for Smart Modern Construction (c4SMC), Western Sydney University, speaks on the importance of joining up all of construction’s inputs in his article ‘When you live in a glass house you should not throw stones’:

“Perhaps the most vexing challenge for construction’s future, is built-world compliance and resilience. I believe that construction assurance is looming as the sleeping industry game-changer… the change will be driven by the insurance and finance sectors who have the most at stake in insuring or securitising tomorrow’s buildings.”

UK Finance Assurance Precedent:

In the UK, Buildoffsite UK is the organisation representing the prefab/offsite sector. It approached Lloyds Insurers to develop a product that would give financiers the confidence to assure clients that payments for prefab/offsite would be secure. The result has been a Lloyds underwritten product called the Build Off-site Property Assurance System — BOPAS. The assurance can be for 60-years and include the design, the assembly and all of the pre-made inputs. 

Bill Hughes, Head of Real Assets, Legal & General Investment Management recently said: “The BOPAS scheme will be an integral part of any credible organisation’s offer, when producing any Offsite/MMC products. It is key in providing the surety and insurance backed guarantee a long-term property investor requires, when investing in a property that utilises modern technologies and products.”

But, BOPAS is only affiliated with limited suppliers and is not taken up by all financial institutions. For this reason, there is now a taskforce accountable to the UK Government on offsite finance, insurance and assurance, as chaired by Mark Farmer of Cast Consultancy and reporting to the Minister of Housing at six-monthly intervals. The Terms of Reference and Working Group minutes have been shared with PrefabNZ in the hope that a similar working group could be set-up in New Zealand to achieve results locally. 

prefab building 2

What Next?

PrefabNZ is working with several primary banks and other secondary lenders to bring more finance options to market to enable prefabricated housing systems to be more accessible for first-home buyers, either as stand-alone transportable homes, or more importantly as future-proofed multi-unit options using 'pod + panel' technologies. 

PrefabNZ has also submitted papers and information about the UK panel for Finance, Assurance and Insurance to the Ministers of Housing and Urban Development (Minister Twyford), and Building and Construction (Minister Salesa). We are asking for the government to lead the establishment of a similar working group as the UK. Through the chair of the working group, Mark Farmer, we also have access to their meeting information and terms of reference to assist in setting up a parallel working group in New Zealand.

Get in touch if you are interested to learn more by emailing [email protected] 

Images: Roll-forming Services factory in Auckland (top), Concision Factory in Christchurch (bottom)

Written by Pamela Bell, founder of PrefabNZ.
Pamela is a consultant for innovation in the built environment. For more information, visit her website.

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