Prefab, Modular, Ready-to-Go: Construction Innovation Evolves

“We are at a critical inflection point. For years, modern methods of construction has been a story of potential—promising quality, speed and sustainability.” Prefab Council Australia founder Waco Tao says that this sentiment reflects broader industry consensus. Modern methods of construction have long been positioned as a solution to Australia’s housing shortages, yet policy gaps and misconceptions have prevented the sector from evolving. In 2025, that began to shift. New South Wales introduced nation-leading regulatory reforms in November, research partnerships developed alternative approaches to prefabrication and the industry moved from questioning whether modern methods of construction could work to figuring out how to scale effectively. “Today, driven by the acute housing crisis and embodied carbon targets, it is rapidly becoming a story of policy and necessity,” Tao tells The Urban Developer . Waiting not going to make it better Building 4.0 CRC director Mathew Aitchison says the urgency driving change differs from previous downturns. “Historically, when the building industry bottomed out, people just went on holiday or rolled with the downturn,” Aitchison tells The Urban Developer . “But waiting is simply not going to make it better. No one thinks that the cost of materials or labour is coming down, so why would we expect the cost of construction to come down?” ▲ Building 4.0 CRC chief executive Mathew Aitchison is focused on developing technology-led solutions to challenges facing the built environment. Modern methods of construction offers a potential way forward. Factory-controlled environments enable greater quality control and reduce material waste, while standardised components unlock economies of scale. The Commonwealth Productivity Commission estimates the approach can reduce construction costs by up to 20 per cent and accelerate construction by up to 50 per cent. But realising these benefits requires regulatory frameworks that support rather than hinder factory-based production models. NSW leads with approval pathway In November, the NSW Government proposed productivity reforms creating a statewide approval pathway for prefabricated buildings. Current arrangements mean every council interprets rules differently, creating inconsistency that makes financing harder and reduces buyer protections. Proposed reforms would make NSW the first Australian jurisdiction to integrate prefabricated homes into standard building approval systems. NSW housing minister Rose Jackson says 80 per cent of buildings should use modern methods of construction content by 2030—part of a $6.6-billion investment to deliver 8400 homes and repairs to 30,000 existing properties. Victoria, Queensland and South Australia have introduced minimum floor size thresholds for secondary homes that bypass planning approval, but these measures address only part of the challenge. States could follow NSW’s lead by creating dedicated approval pathways, removing duplicate design requirements and establishing clear rules for manufacture, transport and installation of factory-built components. ▲ System 600’s kit-of-parts approach offers potential to develop medium-density housing using standardised, factory-produced components. From demonstration to delivery Technical innovation has gained traction this year. System 600, developed through a partnership between Homes NSW and Building 4.0 CRC, targets medium-density housing of four to six storeys, using standardised parts manufactured by multiple suppliers across a distributed supply chain. “We’ve probably got the same ingredients that many others in the industry are working on, but we’ve got a slightly different recipe,” Aitchison says. “The recipe is tailor-made for the Australian market.” The system produces standardised components rather than standardised buildings, with around 80 per cent of components standardised and 20 per cent adapted to specific sites. “We have standard parts, not standard designs,” Aitchison says. “Those standard parts can be recombined in many different ways.” Decades of international experience in prefabricated construction, including capital-intensive failures in the US and UK, as well as Sweden’s more successful models, informed System 600’s development. “Anything that’s capital-intensive and requires a very long period for the return on investment to occur is probably doomed in Australia,” Aitchison says. “I don’t think people have appetites to invest hundreds of millions—indeed billions—in big factories and then amortise returns over a five or 10-year period.” Delete A recipe tailored for the Australian market System 600 works with existing industry capacity. Components including bathroom pods, service modules, facades and structural panels are produced to common specifications by multiple suppliers, enabling competitive procurement while maintaining quality control. A demonstrator apartment launched in Mascot during 2025 ( pictured above ) proves the concept. It was built using parts from Australian manufacturers that produced standardised components assembled by a builder with no prior involvement in the system’s development. The 84sq m home was built in two days, including finishes. “Overwhelmingly, people are really enthusiastic about this,” Aitchison says. “It’s show don’t tell now. We’ve all seen the slide deck but seeing the thing come together in front of you and understanding exactly what the innovation is—that’s crucial.” Interest has gone beyond construction industry boundaries. Major retailers have expressed interest in selling System 600 products alongside their existing building supplies. The positive response sets the stage for the next critical phase—implementation. Aitchison says incremental adoption is key. “We don’t have an ideas problem in the building industry—we’ve got an implementation problem,” he says. “Perhaps in the first tranche of projects, we start with bathrooms. Then we start with bathrooms and the structure—walls and floors. Then bathrooms, walls, floors and services, and so forth until we get to a much higher uptake.” Private sector momentum building Modular construction group Signex has completed five architecturally designed homes at Mickleham in Victoria in two months using prefabricated construction systems. Volumetric modular construction, where complete room modules are factory-built then assembled onsite, is also gaining traction at scale. ▲ FK renderings of Freecity’s proposed VMC tower in George Street, Parramatta. Freecity’s $300-million, 20-storey student accommodation project at Macquarie Park will become Australia’s tallest volumetric modular development. Freecity executive director of development Michael Romano says the volumetric modules are designed for potential disassembly, preserving flexibility. “We’re assembling buildings onsite ... in a way that we can disassemble them, too,” Romano says. “That means we’re not just preserving land value, we’re preserving flexibility.” Freecity Group describes 2025 as a landmark year for volumetric modular construction in highrise development. The company shifted from planning to execution, will deliver its first student accommodation projects in 2026 including the 20-storey Macquarie Park development that will become Australia’s tallest volumetric modular building. It also announced last week a $248.8-million, FK-designed 40-storey tower in Western Sydney to be delivered through volumetric modular construction. Wholesale model lowers barriers Modular Pathways director Craig Gemmill is making modular construction more accessible by providing standardised components that builders and developers can incorporate into projects without requiring entire factory-built modules. His model reduces capital barriers for smaller operators while maintaining quality control through factory production of key elements. ▲ Modular Pathways director Craig Gemmill says there is broader acceptance and government appetite for encouraging modular. Gemmill says there has been progress in 2025 but barriers remain. “If we’re talking about encouraging scalability to respond to the housing crisis, there are so many handbrakes along the way,” Gemmill tells The Urban Developer . He wants clarity from state governments on home standards to accelerate adoption across the sector. “And these things need to be addressed on a shire-by-shire basis,” he says. National framework needed for scale Tao sees three significant barriers to national adoption: inconsistent interpretation of the National Construction Code across 537 local government areas, lack of standardised deemed-to-satisfy provisions for factory-built systems and state-based differences in road transport regulations for oversized modules. “The greatest barrier isn’t the code itself—the National Construction Code is largely performance-based and can accommodate modern methods of construction,” Tao says. “The problem is the inconsistent interpretation by certifiers and regulators.” ▲ Waco Tao is the executive chair of Prefab Council Australia and founder of PowerHouse Homes. Prefab Council Australia is focused on creating technical and policy pathways to “harmonise application of the code”. “Aggregation is key,” he says. “Development corporations, super funds investing in build-to-rent, or industry-led consortia can pool demand from multiple projects to create the volume that makes factory production viable.” Aitchison sees a real opportunity in Australia’s existing industry capacity. “We’ve got a real chance here to develop a unique Australian industry that can respond to the biggest captive manufacturing market that exists in this country, which is the building of houses,” Aitchison says. Realising that opportunity now requires coordinated action, Tao says. “The mindset has changed. Now, the systems must follow.”

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