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Prefabricated and kit-built homes are gaining traction nationwide as a way to generate additional income, add value to existing properties, and address affordability constraints. Market analysis from realestate.com.au projects the sector will grow by 7 per cent annually to reach $18 billion by 2030.
However, access to finance continues to lag behind demand. One broker specialising in modular home lending said she currently works with just two lenders servicing the space.
Teressa Fisk, director of Sunshine Coast-based Your Finance Broker, said modular homes have been her primary area of business for the past four years.
She told Broker Daily: “We have noticed recently that the requests are increasing, and we are hearing from our building partners that they have had a big increase in inquiries.
“However, finance options are still the pain point. We only have two lenders who will assist and both have different payment schedules.”
Obstacles to finance
Fisk said differences in construction methods remain a key barrier to broader lender participation.
She said: “Most lenders are reluctant due to the build taking place at the builders’ warehouse and then being transported to the land, as opposed to being built directly on the land. This is mainly as they feel it is a higher risk being transported to the property.
“Although I feel the more education around this type of build could be really beneficial and allow for more options for our clients.”
Security concerns also persist. Jamie Mitchell, senior asset broker at Great Escape Finance, told Broker Daily sister brand The Adviser that the nature of prefabricated homes can complicate lending security.
“When taking out a mortgage, the lender will take security over the title – yet lenders cannot yet take the tiny home as security because the associated risk is too high,” he said.
Construction processes can also conflict with lender requirements, according to Fisk.
“Not all builders can adjust their progress schedule as per the lenders’ requirements, meaning the clients have to try and find a builder who will or change to a traditional builder,” she said.
“We’re still doing some education with the lenders and builders around the policies and how we can assist them to achieve their goals.”
Similarly, Eva Loisance, a broker at Finni, said lender hesitation is often linked to reduced oversight during construction.
Speaking on Broker Daily Uncut, she said: “With modular homes, banks like to control what’s going on. A modular home is built off-site and then placed onto the land. The bank has no control there.
“There are no stages where they can go and check: ‘Okay, that’s been done properly, let’s move on to the next stage and pay the builder as we go.’
“They just end up with a finished product, and if something goes wrong, that’s the security they have – that’s the collateral. If it’s not to their standard, it can lower the value of the whole property.
“I understand why they’re a bit hesitant.”
Changing attitudes
Despite these challenges, modular homes, alongside tiny homes and granny flats, continue to gain momentum.
Interest in granny flats has also risen sharply. A recent Housing Industry Association survey found builders expect to deliver roughly 10 times more granny flats this year than in 2022.
At the same time, National Australia Bank (NAB) reported renovation loans increased by 21 per cent in 2025. Domain data showed “granny flat” was the most searched property term in Sydney, up 3.1 per cent, and also ranked among the top 10 in Perth (+59.8 per cent) and Adelaide (+24.4 per cent).
Retailers are also entering the space, with Bunnings launching flatpack pod homes starting at $26,000.
Fisk said improving understanding across the industry will be critical to unlocking further growth.
“Modular policy has been updated over the last six to 12 months with our two major lenders, but we still get clients who come to us and have been given incorrect information from their lender or their broker,” Fisk said.
“This just comes down to education around the products that are on offer and how they need to work and be presented to the bank.
“Working in this niche we have been in the trenches assisting the lenders and builders to adjust their policy and contacts to try and align better and provide our clients with their new home.
“Overall, I would love to see more lenders come on board so that we can provide our clients with more options, rather than only having two lenders who can assist.
“We have builders call us each week who are turning people away due to lack of finance options for the clients. In a time where houses are needed, I feel these types of builds are our future.”
[Related: Why bridging finance is surging in WA’s property market]
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