'We will have no other choice': Why the future of Australian housing could be factory-built

This 2025 Dateline episode explores Sweden's prefabricated houses and whether they can be the answer to Australia's housing supply crisis. Watch Sweden's Flatpack Homes on SBS On Demand.

This story was originally published in 2025 and has been updated.

Could a home that you assemble like a piece of flatpack furniture be the future of Australian housing?

Prefabricated buildings — or prefab — are a construction process in which all or part of a structure is built in a factory and brought on-site for assembly.

Dr Tharaka Gunawardena believes that more of us will soon be looking to prefab homes.

The structural engineer and senior research fellow at the University of Melbourne, who has researched modular construction for 15 years, says prefab buildings are a manufactured product, just like "your mobile phone, your car, your clothes".

A key driver towards prefab is the declining number of people entering construction trades, he says.

"In a few years' time, we will have no other choice but to manufacture buildings," he told SBS Dateline.

"Australia is moving towards [prefab], but … our industry, our supply chains, have a fair distance to go."

Prefab homes can cost anywhere from $150,000 to $500,000, potentially more depending on customisation and size.

But Gunawardena says the part of prefab that really saves money is the time it takes to build them — because a house could be on site in as little as a week.

"Compare that to a six-month build and see how much you save with your bank loans, interest, and all the other costs involved."

State governments are also starting to see the merit in prefab.

In May 2026, the NSW government announced it would reform housing laws to support what it calls modern methods of construction, including prefab.

"The reforms we're introducing will remove barriers to prefabricated and modular housing without compromising building quality, allowing more people to take advantage of the benefits of modern methods of construction," said NSW Housing Minister Rose Jackson.

NSW isn't alone. In June, Tasmanian Premier Jeremy Rockliff announced reforms under the Modular Housing Finance Guarantee, which will allow people to access finance for their modular homes during construction.

And according to market research company Mordor Intelligence, the prefab construction market is estimated to hit US$9.01 billion ($12.8 billion) in 2026, up from US$8.35 billion ($11.9 billion) in 2025.

One example of what accelerated-scale prefab housing could look like is the home of flatpack itself: Sweden.

A Swedish example

Perched on a cliff overlooking the Baltic Sea, Swedish couple Rickard Rundqvist and Mattias Borg's home looks like it was pulled from the pages of an architecture magazine.

With floor-to-ceiling windows, exposed timber and minimalist decor, it's peak Scandinavian aesthetic: simple and functional.

But what makes this 70 square-metre one-bedroom house with a sauna even more remarkable is that it was built in six days.

"We had to do some interior stuff like the bathroom and the kitchen," Mattias says. "But pretty much the house was there: the windows, the roof, everything."

Historically, prefab has had a bad rap. In Australia, it's often associated with school demountables and mining dongas.

And while the process may be thought of as low-quality and unoriginal, Rickard and Mattias say their home was designed to reflect their vision in collaboration with architects at the construction firm.

"This is totally custom-made from our drawings," Mattias says.

"People think that the prefab house is, you have to pick it from a catalogue. But it's not actually, it's just a way to construct it, which is much more efficient."

Gunawardena also said prefab homes don't have to look the same.

"You can still make it a mass-manufactured product but still have customised options for you."

Although the couple doesn't disclose the total costs, they say they did save money because less labour was involved.

"I think it's just the most practical way of doing it. [We saved] time and money, [it was] way more cost efficient," Rickard says.

Renting a prefab

Meanwhile, 24-year-old Kilian Schott and 20-year-old Maja Blomgren have recently moved into their rental — a small studio apartment on the outskirts of Stockholm.

The couple was living with Maja's parents and thought it would take them years to find an affordable home of their own. But then came an influx of prefab apartments in their desired area.

Their complex consists of 96 apartments, all built in a factory.

It took just eight weeks to assemble each apartment on-site; the entire build — from factory to finish — took 10 months.

"There were, I think, 60 apartments published at once. And since they did not have 60 people applying for them, they took all of the possible tenants and gave them the opportunity to rent these apartments," Kilian says.

A housing crisis solution?

Like Australia, Sweden is in a housing crisis, with a lack of supply at the root of the issue. Soaring house prices are pushing home ownership out of reach for many, forcing more people into an overcrowded rental market.

High demand for housing has fuelled a boom in prefab construction in this Scandinavian nation, where it's seen as a faster and more efficient way of building new homes.

Across the country, so-called 'house factories' churn out up to four apartments a day, equipped with insulation, electricity and plumbing and ready for assembly on site.

Modelled on the car industry, the factories have their operations centred around one main production line, with robots working alongside humans for speed and efficiency.

It's estimated 90 per cent of houses and 20 per cent of multi-story apartments in Sweden are built with timber using the prefab method.

Meanwhile, in Australia, prefab makes up less than 10 per cent of construction, according to prefabAUS, the peak body for the off-site construction industry.

In Sweden, where 70 per cent of the territory is covered in forest, timber is championed as a climate-friendly alternative to other building materials such as steel and concrete.

"When we're talking wood today, we're talking mass timber, or engineered timber," architect Oskar Norelius says.

Norelius is leading an ambitious project, Wood City, a new residential district in the south of Stockholm with 2,000 apartments and 7,000 office spaces as well as restaurants, retailers and supermarkets — all being built using prefabrication.

He says engineered timber, a type of manufactured material made by layering wooden boards in different directions, is lightweight, fire-resistant and gives structural strength to the building.

"It's a good material, it's very lightweight, it's quite easy to work with in a factory," he says.

A 'lot of interest' in prefab

With Australia's housing crisis also driven largely by a lack of supply, how we build our future is a hotly debated topic.

The federal government says Australia will need 1.2 million new homes in the next five years, and there is growing recognition of the potential benefits of prefab.

In its 2025 budget, Labor pledged almost $50 million to support modular home construction.

In 2026, it committed to further regulatory reform in service of "removing barriers to using modern methods of housing construction".

Professor Mathew Aitchison from Monash University heads Building 4.0 CRC, a research centre co-funded by the federal government. Its goal is to get Australia to build homes better, faster and cheaper.

Speaking to Dateline in 2025, he said prefab is one solution, but it's not without its risks.

"If you want to make a prefabricated housing business, it does require a large amount of capital to set it up. It requires planning, it requires knowledge of manufacturing, and that can take some time."

And to be both profitable for businesses and affordable for consumers, you need to build at scale, he says.

"It is possible to build anything prefabricated, but it's going to cost a lot more money if it's a one-off. The value you get from prefabrication is when you have high volumes being churned out in factories."

And in Australia, that won't happen overnight.

"We don't have the same history and culture of manufacturing that the Swedes do. I think we also have to acknowledge that [the house factories] have been developed over decades."

There are other hurdles too, he says. Banks aren't properly set up to loan people money for offsite construction projects and building regulations will likely need an overhaul.

But Aitchison says momentum is building.

"There is a lot of interest in [prefab] in Australia at the moment and that's coming from industry and government. There are many lessons we can learn from Sweden, and I think the future of construction is a future of industrialisation."

Speaking from a modular bathroom factory on the NSW Central Coast, where they make around 16 bathrooms a day, Aitchison says it's this type of prefab that is taking off.

"I would say bathroom pod manufacturing is perhaps the most mature part of Australia's prefab industry," he explains.

"Instead of having teams working for weeks on a building site at level 25 in downtown Sydney, they can do all of the work here in a factory and drop this pod in [an apartment] in a single day."

Aitchison doesn't think mega house factories, like those in Sweden, would work in Australia. He'd rather see the industry embrace the idea of smaller factories that specialise in different elements of a home.

"[Prefab] can be what we want it to be. So, to me, speeding up that building time using less materials, less waste, less labour — that's innovation."