relocatable home

Is a Prefab Home Your Ticket onto the Property Ladder?

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Prefab houses are cheaper, quicker to build and have fewer budget blowouts, but banks haven’t given them much love … until now. Kylie explains…

Imagine owning a patch of land and one day a truck backs up, plonks down your new home and, voila, you’re a homeowner. Although a prefab home can seem like a friendly and easy entry into the property market, your bank most likely has had a different opinion … up until now. 

 

Prefab houses have been notoriously difficult to fund because there has been no security for the bank to lend against in the beginning. You’ve been required to pay for the dwelling before it was delivered to the site. Historically, this meant that it was out of reach for most first-home buyers—unless parents had enough equity to pay for the dwelling up front against their property.

 

But there’s a glimpse of sunshine peaking out from behind the dark cloud hanging over the prefab home dream. Westpac have recently completed a successful nine-month pilot in both Albany and Invercargill on a new build product called Prebuilt—a dedicated mortgage product aimed at helping Kiwi’s get into prefabricated homes. They’ve just announced this product and are beginning the process of rolling it out to all of New Zealand.

 

So, watch this space.

 

The prefab home market is expected to grow over 200 per cent in the next year. So, with Westpac’s new product on offer, the prefab homes should be a hit with both buyers and builders.

 

But what exactly is a prefab home?

 

Prefab homes (prefabricated homes) are built under controlled conditions, usually in a factory, and are transported to their final location by truck.

 

This method of building provides several benefits above traditional building methods:

·      They can be cheaper and their costs are tightly controlled (so no project blowouts!).

·      The build time is also much quicker than your standard build, with some prefab homes taking just 18 weeks.

·      The overall cost is around 15 per cent less than a standard build.

 

The prefab home designs have also come a long way in the last few years, with trendy and modern options on offer.

 

So dream on … and chat to us about the options!

 

The False Economies of Relocatable Houses

In today’s runaway housing market, does a relocatable home represent a viable option for first-home buyers? Rupert Gough investigates.

 

I don’t know if you’ve heard, but housing in Auckland has got a tad expensive. 

 

Each week there are many articles touting either the inevitable downfall of property or the infinite despair of the first-home buyer. I know this, because it’s my job to load up our social media accounts with relevant articles and, frankly, it takes no time at all. There are a ton of news articles out there whenever I want them.

 

And then I get this call. 

 

My client has found a section for a reasonable price, about an hour or so north of Auckland, and they’re going to put a relocatable house on it. It’ll cost $400k to build or they can simply buy a house and have it moved there for $150k. Sounds easy, right? So, why isn’t everyone doing this?

 

Most of the problem comes down to a cash flow issue. With a $400k house, the banks can lend you 80 per cent (sometimes even 95 per cent) of the build cost.  That means for a $400k house you might need as little as $20-80k (I’m simplifying here but stay with me). For a $150k relocatable house the bank will not lend you anything until the house is on the land, plugged in and ready to go (with a Compliance Certificate).

 

So why are the banks so reluctant? Because the house isn’t of any value to the bank until it is proven to be compliant. It could have broken on the truck while being relocated or it could have shoddy wiring from 1920 when it was last renovated.

 

So for the $150k relocatable house, you will need $150k cash. By this time, the pro-relos will be screaming at their monitors and saying that the resulting mortgage is much less and, of course, yes, you’re correct (so hang up your pitch forks and delete the angry comments).

 

However, for the majority of people who call me, getting the deposit together is the main hurdle they are facing. That’s why they’ve gone in search of the super cheap housing in the first place—not because they are trying to minimise their total mortgage. So, without a very healthy deposit, you’re just not going to get the bank’s support for that relocated house.

 

So, here is the lesson to take away: Houses, like wine and life-partners, are actually worse for you when they’re unbelievably cheap.

 

Rupert Gough is an Authorised Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.