Ray White Group Chief Economist, Nerida Conisbee, said traditional building approaches are becoming increasingly unviable for affordable housing, even as national construction cost growth has moderated from pandemic peaks.
“While national construction costs have cooled from their pandemic peaks – dropping from 17.8 per cent annual growth in December 2022 to 1.4 per cent in March 2025 – the damage to housing affordability has been severe,” Ms Conisbee said.
She said that regional disparities remain significant, with Western Australia still experiencing construction cost increases of 10.7 per cent annually, while even markets showing declines like NSW and Victoria are building from a dramatically higher base.
The traditional housing construction industry has remained largely unchanged for decades, relying on inefficient site construction methods that have been further challenged by severe labour shortages.
“Master Builders Australia research has found that the industry requires 90,000 new workers to meet current demand – a shortage that would require 360,000 years of training if filled entirely through traditional apprenticeships,” Ms Conisbee said.
These factors have contributed to record dwelling completion times, with the average house now taking over 10 months to complete, compared to 6-7 months under normal conditions.
Against this backdrop, modular construction is emerging as a promising alternative, offering substantial efficiency gains.
“Modular construction can reduce building costs by 10-20 per cent while cutting construction timeframes by up to 50 per cent compared to traditional methods,” Ms Conisbee said.
She said the cost advantages stem from multiple factors including factory-based construction eliminating weather delays, reducing material waste through precise manufacturing, and achieving economies of scale impossible on individual construction sites.
“When components are manufactured in controlled environments, quality improves while labour costs decrease through more efficient deployment of skilled workers,” she said.
The modular construction market has shown steady growth, expanding from $3.7 billion in 2018 to a projected $7.7 billion by 2030, representing compound annual growth of 6.4 per cent.
Ms Conisbee said that even more innovative approaches are on the horizon, though widespread adoption remains some time away.
“LUYTEN’s 3D printed multistorey home in Melbourne completed construction in just five weeks compared to the typical 8-11 months for traditional builds,” she said.
The federal government has recognised the potential of these alternative construction methods, allocating significant funding in the 2025-26 Budget to support the sector’s growth.
“The Australian Government allocated $54 million to support the prefabricated and modular housing sector,” Ms Conisbee said.
“This funding comprises $49.3 million to assist state and territory programs aimed at expanding the prefab and modular housing industry, and $4.7 million to develop a voluntary national certification process.”
An additional $120 million from the National Productivity Fund has been committed to incentivise states and territories to eliminate regulatory barriers hindering the adoption of modern construction methods.
These initiatives form part of the government’s strategy to meet the National Housing Accord’s ambitious target of building 1.2 million new homes by 2029, with modular construction potentially playing a crucial role in achieving this goal.
