Goldman bets on prefab homes

Investment bank Goldman Sachs is putting its money into prefabricated houses And where investment banks go, others tend to follow.

943-Sweden-634

In Sweden most houses contain pre-made elements

And where investment banks go, others tend to follow...

Investment bank Goldman Sachs is putting its money into prefabricated houses: dwellings that are put together in a warehouse and then delivered to their destinations fully formed. Goldmanhas decided the prefab industry is worth a$75m investment.

Modular housebuilding is not exactly new to the UK: we tried it in the aftermath of World War II in an attempt tomeet the urgent demand for housing.Yet today's prefabs are, thankfully, more stylish as well as more energy-efficient. The idea is that if production is increased, prefab housing could go some way towards meeting the 300,000 houses-per-year target the government thinks we must reach in order to keep up with demand.

Unfortunately, the UK is far behind other countries in adopting the trend. In Sweden, around 84% of houses are built using prefabricated elements, according to Forbes. This proportion is 20% in Germany, while in Japan more than 15% of houses are built in factories. In the UK, only 15,000 (7.5%) of the near 200,000 houses constructed in 2017-2018 were prefabs. The government wants to increase that figure to 100,000.

But despite the slow start, there are signs that the idea is taking off. The company Goldman has invested in TopHat says it can build three flats a day from its site in south Derbyshire. Its first project is to build 300 houses in Kent.

And Goldman isn't the only big name showing an interest in the sector. Financial services company Legal & General has its own modular homes division, with a factory in Leeds that has the capacity to produce up to 3,000 prefab houses per year. Ilke Homes, based in Yorkshire, says it can build eight houses a day these properties would cost 20% less to heat than traditional new-builds.

It remains very difficult for people to invest directly in modular housing (although Amazon, Google and the UK's Berkeley Homes are all dipping a toe into the sector).And there are certainly still hurdles to prefabs going mainstream. For one, the construction cost per unit is 12% higher than with normal building methods, so housebuilders are reluctant to embrace the option; and there is a limit to the size of a property that can be transported on the back of a lorry. However, it is when big investors begin putting up cash that problems like these miraculously start getting solved.

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