Bank trials financing for prefab housing

Westpac has begun a pilot scheme to test a mortgage lending system for people wanting to build a prefabricated home.

A three-month trial will involve financing the construction of six prefab homes in Auckland and Waikato and, and if it works, the system could go nationwide.

People with land wanting to erect a factory-made prefabricated home on their site can find it hard to get a bank to lend them the money to do it.

Westpac chief executive David McLean said that if the pilot was successful, the bank would roll out the system nationwide.

The prefabricated building sector is on a roll, and hopes the Government’s KiwiBuild project will deliver it a massive pipeline of new work, enabling prefabricated house builders to invest in new production capacity.

But a hurdle to expansion is the difficulty in getting mortgage finance for individuals aiming to erect a prefabricated home for themselves.

McLean said: ‘‘Prefab housing is increasingly being built to incredibly high standards of design and construction, and its affordability makes it a great option for many buyers.

‘‘Easier access to mortgage lending would move prefab housing from sitting in the toohard basket to being a viable choice for lots of Kiwis.’’

PrefabNZ, the industry body for ‘‘off site’’ building manufacturers, estimated that prefabricated building techniques could reduce construction costs by about 15 per cent, and building time by up to 60 per cent.

The biggest hurdle for banks is releasing money to a prefabricated home builder so it can be made in the factory.

Banks do not like lending money in such situations as there is no security they can seize and sell, should something go wrong, such as the prefab firm going bust.

‘‘It’s often meant would-be buyers have struggled to find a builder willing to take the risk that the buyer would obtain bank finance at the end of the prefab build, and have also had to negotiate bespoke terms with a lender,’’ McLean said.

‘‘Usually, any arrangement has involved the builder getting a large temporary overdraft over the course of two months and financing the build out of that, essentially using their own money. Our new way of funding removes some of the hurdles that have existed until now, and gives buyers and builders confidence about partnering on a build.’’

Westpac hoped the first of six houses built under the terms of the project would be built and arrive on site by the end of September.

SUPPLIED Prefabricated homes can be better quality, as well as faster and cheaper to build, compared with traditional ‘‘stick built’’ homes.

SUPPLIED This Housing New Zealand three-storey Auckland apartment complex was entirely prefabricated in a factory and constructed on site.

GETTY IMAGES Prefabricated housing has come a long way since the 1950s.