Politics & Society
How construction technology can help solve Australia's housing crisis
New business models could help save Australia from its housing crisis
With housing affordability at a record low, new business models could offer a unique solution. But we need to rethink the way we own and build homes
Published 11 June 2025
Australia has experienced a dramatic rise in housing prices over the past decade. Data from the Australian Institute of Health and Welfare shows that by the end of 2023, median house prices across major cities have risen substantially, with prices in Sydney soaring to a staggering $AU1.3 million.
Canberra, Melbourne and Brisbane followed closely. Those median prices sit at $AU980,000, $AU840,000 and $AU830,000 respectively.
Compared to other countries, home ownership is becoming increasingly out of reach for many Australians – we now lag behind countries like the US and the UK.
And other housing affordability metrics in Australia continue to paint this grim picture.
The house price-to-income ratio now averages at 16.4 times the per capita income, nearly double what it was in 1990, and significantly higher than in 2020.
Affordability for median-income households reflects a similar trend, with only 10 per cent of the housing market now affordable to them, down from 40 per cent in March 2022.
Another key indicator we use to look at affordability shows the number of years to save a 20 per cent deposit now exceeds 13 years in Sydney, followed by 11.8 years in Hobart and 10.9 years in Brisbane.
Additionally, the percentage of household income required to service a new mortgage has also risen across major Australian cities; we’ve got 62.1 per cent in Sydney, and 51.7 per cent in Brisbane, which has doubled since 2019.
All of these metrics tell us just how much Australia’s housing affordability has deteriorated over the past few decades.
But before we explore possible solutions, we need to first understand the root causes.
The mismatch of supply and demand
The housing issue is shaped by a complex blend of factors, including rising demand, changing household incomes, shifting demographics and taxation policies.
One key driver is the mismatch between supply and demand, particularly in rapidly growing urban centres.
With almost half of Australia’s population now living in major cities, economists point to a shortage of available urban homes along with the increasing inability of many Australians to keep up with soaring rent and property prices.
In response, governments at all levels have committed to increasing the housing supply by 1.2 million new homes by 2029, an ambitious target that requires a 40 per cent increase in annual housing delivery over the next five years.
Despite this promise, there are growing concerns about whether this target is really attainable, particularly with the current approaches to housing construction.
Many housing experts warn that new supply is likely to fall short, citing the limited involvement of local governments in national decision-making as a major barrier.
In the current Australian housing discussion, the opportunities presented by new business models are largely missing.
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For example, some approaches could be inspired by servitisation – where instead of selling the land itself, governments or developers sell land as a service, packaging access with maintenance and infrastructure, perhaps on a lease.
If combined with prefabrication, a smart building method that enables faster, cost-effective construction, it could transform the housing market and help meet the ambitious housing targets.
But how can they be applied in Australia?
Rethinking the way we ‘own’
Servitisation models present a new way of thinking about ownership by shifting the focus from ownership to access.
If we think about the concept in terms of housing, this could enable local councils to respond to urgent housing demands by leasing undeveloped land temporarily.
In particular, this approach can help rapidly deploy temporary homes in response to disaster relief and low-income housing. Ideas like peppercorn rent schemes – where land is leased for a nominal fee – mean councils could temporarily meet housing demands.
Land value plays a direct role in housing affordability, with higher costs associated with land often driving up housing prices and impacting people’s ability to afford homes.
Servitisation can help by distributing land costs over a certain period, drastically improving the affordability of social housing schemes, and potentially eliminating the high capital expenditure associated with land.
Combined with prefabrication, servitisation could offer a holistic housing solution that integrates design, fabrication, installation and disassembly, as well as the possibility of bundling building services into the service offering.
Rethinking the way we ‘build’
Prefabrication, also called modular or off-site construction, is a mode of production where building components are manufactured away from the construction site.
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By manufacturing standardised and modular components in a controlled environment, this approach offers a faster, cheaper and efficient way to build. These parts are then transported to the building site and assembled like pieces of a puzzle.
Despite its long history in Australia, its adoption in the construction industry has remained limited.
Currently, prefabrication represents less than five per cent of Australia’s $AU150 billion construction industry. Although it’s estimated to reach 15 per cent by the end of this year, we’re still well behind other developed countries like Finland, Norway and Sweden.
In its modern form, prefabrication is a part of a broader, innovative business model known as industrialised building, which combines prefabrication, modularisation and standardisation.
Collectively, this business model promises a range of benefits, including improved productivity, reduced construction waste and significant time and cost savings.
Technology plays a crucial role, supporting every stage of the process from design to production and on-site assembly. By reducing lead time and increasing productivity, these technologies can help drive down costs.
A range of technological enablers, collectively referred to as Industry 4.0 technologies, include sensors, data analytics, robotics, artificial intelligence, additive manufacturing and augmented/virtual reality, contribute to its evolution.
The true cost-saving potential of prefab housing is realised when implemented at scale, enabling economies to drive down cost and improve affordability
With supply bottlenecks and unmet demand, prefabricated houses can potentially boost housing supply in a short timeframe.
Bringing new business models into the housing dialogue
New business models like servitisation and prefabrication hold great promise in addressing Australia’s complex housing challenges.
But current affordable housing discourse tends to focus on government policies, taxation, rising costs and inadequate supply.
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While these factors are important, we need to broaden the conversation to include new business models that tap into unique solutions.
At the core of the housing issue is a mismatch between supply and demand, an issue that servitisation and prefabrication are well-positioned to help resolve by offering a whole housing solution on a service basis.
This article was written with the insights of industry professionals, with special thanks to Damien Crough from prefabAUS.