4. How to make prefabs stack up

Westpac is running a trial to help home buyers navigate the tricky exercise of financing a prefabricated home. Photo: Lynn Grieveson

Up to 80 percent of KiwiBuild homes could be prefabricated, but hopeful buyers may find it difficult to organise the finance they need.

Banks are still reluctant to lend against prefabricated homes, even as the Government announces it will seek expressions of interest from prefab builders to fulfil its KiwiBuild ambitions.

Banks will only lend against a prefab home once it is affixed to the site, not when it sits in a factory. This can be a barrier to first-home buyers or developers looking to secure finance for a prefab.

They may come up against cashflow problems when they want to buy a prefab from the manufacturer, but can only secure finance once the prefab is on site.

A spokesperson from Kiwibank told Newsroom that banks have traditionally offered mortgage lending against a home already in place on the property. A prefab sitting in a factory could not, therefore, be borrowed against.

But the bank said there were other ways of financing prefab developments, including using the equity in the land itself or looking to manufacturers to finance the prefabs by accepting a deposit for a prefab with the full payment coming once the home was onsite and code compliance issued.

In May, Westpac began a pilot scheme to look at financing prefabs. Over three months, it will finance the development of six prefab homes in Auckland and Waikato.

The bank will finance homes that are fully completed in a factory and transported to the site by truck. The bank will provide finance to the builder as pieces of the home are completed removing the need for the builder to finance the whole development outright.

The pilot will be completed by September, by which time Westpac says it hopes to look at rolling out the program nationally.

Pamela Bell, CEO of PrefabNZ, told Newsroom that the industry was looking at ways to make financing prefab houses easier.

She wants a working group, reporting to the Housing Minister, to be set up to make recommendations on how banks could finance offsite housing.

The UK’s Working group for offsite finance, insurance and assurance was one model that could be followed, she said.

Bell said Prefab NZ had spoken to Housing Minister Phil Twyford in March about creating a similar working group in New Zealand.

“What we’d like to see is a consistent approach across all of the banks and one of the ways to get that is to use a scheme that is universally accepted,” Bell said.

“The minister needs to lead so the banks have a consistent approach,” she said.

Bell said possible solutions could include providing finance to the manufacturer or developer or even getting a third party to provide a layer of assurance.

Manufacturers' confidence the key to prefab plan

Twyford, speaking on Newshub Nation on Saturday said a solution to the problem of financing prefabs for KiwiBuild could involve Government or private investors financing the developments before having them onsold to buyers upon completion.

He said that KiwiBuild would provide the scale and pipeline of work to enable prefab manufacturers to have the confidence to expand.

Twyford said that eventually over half of KiwiBuild’s homes could be built as prefabs.

But the Opposition has attacked the plan, with National’s housing spokesperson Judith Collins telling Newsroom the previous Government had not focused on prefabrication, “as evidence had suggested the industry failed to stack up in New Zealand”.

PrefabNZ dismissed this, saying as many of 80 percent of KiwiBuild homes could be prefabs.