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30 Jul 2017

Supply and Demand – The Economic Impact and Potential of Modular Housing

As we push into the latter half of 2017, the housing affordability debate continues in political and news circles globally, with the same topics and solutions being discussed with seemingly no impact on actual prices. One politician blames immigration, one developer blames councils, a home owner tells young people to work harder, an analyst blames interest rates and so forth, and before we know it prices are still growing and smashed avocado becomes the culprit. Regardless of the true reason for a lack of affordable housing, it’s clear that the same old discussions are doing little to help people in dreams of home-ownership. We think it may be time to explore some alternative options.

Supply And Demand

Regardless of the causes of supply, it is unarguable that the economics of the housing market is driven by the simple economic theory of supply and demand. Many people want homes, and there doesn’t appear to be enough homes to go around. Major policy shifts like changing immigration requirements or quotas, planning overhauls and financial assistance packages are never going to pass through bureaucratic processes with any real haste, leaving us with limited options to essentially deliver more supply. This leads us to the next stage of the problem.

Building In A Boom

So there’s a lack of supply and a healthy demand. Developers see the opportunities, interest rates are favourable, and a building boom occurs. Sit in Brisbane and count the cranes surrounding the river, do the same in Melbourne, San Fransisco, Berlin or even Gold Coast and it becomes clear, apartment construction is in full swing. Investors and wealthy buyers take their picks of properties that aren’t even built yet, large commercial builders occupy most of the labour force either by direct employment or major subcontracting packages, and building prices continue to surge. Prices for everything continue to rise, developers, bankers, investors, subcontractors and material wholesalers all make the most of the conditions, while wages in other sectors stay stagnant, and many are forced to watch the party from the outside as the home ownership dream drifts away.

Modular Opportunity

To understand how modular construction could capitalise on some of these trends, it’s important to understand the key benefits of modular in the first place.

  • flatpack-solutions-coverSupply can be delivered much faster as the majority of work is carried out in factories which are not impacted by weather or site conditions, allowing for longer shifts.
  • Supply can be built and held to be delivered when required.
  • Approvals can be fast tracked in certain cases.
  • Customers can see progress shots of their build, unlike traditional construction methods who may show updates of a whole building.
  • The site works and fits out can be carried out simultaneously.

This combination allows for a major building overall both in time periods and costs, however, until banks and master builders associations begin to offer assistance in the budding sector of modular construction, things may not change soon.

 

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