Prefab Homes in Canada: Who Should Buy One Who Should Not?

If you are anything like me then social media has become one of your biggest sources of updates on everything happening around the world. I am not saying that's a good thing but just the times we live in. A few days ago I was scrolling through my Instagram when I happened upon a reel titled “I bought a home from Amazon". Naturally being a real estate writer I was intrigued so I watched it, and then I watched it two more times because the first time I couldn't believe my eyes.

The man literally unboxed a giant package from Amazon to reveal a fully finished home which he then unfolded into 2 bedrooms, a kitchen, a living room and a hallway. How much he paid for it? Only $20K! Think about it for a second: No down payment, no mortgage headaches, and definitely no awkward open houses. It's just you, your card, and the Amazon app. Welcome to the world of Prefab homes where home buying is as easy as clicking add to cart.

WHAT'S THE DEAL WITH PREFAB HOMES?

Well, they're like the IKEA of housing – pieces built off-site and put together on your lot, making for faster construction. They started off as military barracks and farm buildings back in the day, but then fell out of favor in the 80s due to quality concerns. But guess what? They're making a comeback, thanks to better tech and designs. Big players like Nelson Homes and Built Prefab are in the game, along with regional champs like Pacific Homes and Bonneville Homes. In Canada alone, the prefab market has ballooned to $2.4 billion, with permanent modular construction tripling since 2015. And now, with Amazon jumping into the mix, prefab could be the next big thing in housing.

THE CARROT AND THE STICK

Prefab homes can be built significantly faster than traditional homes, often in just a few weeks or months compared to several months or even years. According to a study by Modular Building Institute in 2023, modular construction in Canada can create significant efficiencies in construction time and costs, reducing at least 20% of construction costs and shortening construction times by up to 40%. Most importantly since Prefab homes are made in a controlled factory environment it allows for a lot of quality control and design flexibility resulting in extremely energy efficient and sustainable homes.

While customization is possible, there may be fewer design options available compared to traditional homes. Some prefab homes may have limitations on where they can be placed due to size, weight, or local regulations. Additionally obtaining financing for a prefab home can sometimes be more difficult than for a traditional home which is especially troublesome for first-time home buyers since some incentive programs may not apply. Lastly there may still be some stigma associated with prefab homes, although this is decreasing as their quality and design improve.

WHO SHOULD BUY IT?

Although Prefab homes are built to make housing easier for home buyers from all backgrounds there are some who benefit more than others. For budget-conscious buyers seeking affordability and speed, prefab homes offer faster construction timelines and potentially lower labor costs. Factory-built components ensure quality control and adherence to codes, appealing to those valuing consistency. Eco-conscious individuals will appreciate the minimized waste and energy-efficient designs. Despite fewer options, customizable layouts and finishes suit those open to design flexibility. Additionally, since prefab homes are easily transportable, it makes them ideal for those living in remote locations or always on road.

WHO SHOULD NOT BUY IT?

Just as some benefit more than others, there are also those who stand to gain considerably less. Prefab homes may not suit those desiring highly unique designs due to limited customization options. Individuals with strict budgets should consider additional costs like land, foundation, and permits. Strong attachments to specific locations may clash with local regulations limiting prefab placements. Traditional construction enthusiasts may find prefab methods lacking the hands-on appeal and on-site modification potential they prefer.

VERDICT: A SOLUTION OR A JUST A GIMMICK?

In a country like Canada, where home prices in major cities like Toronto and Vancouver show little to no signs of coming down, prefab homes might just be the alternative everyone has been looking for. This is especially true considering the fact that Canada needs to build around 3.5 million homes by 2030 to meet its rising housing demand. Not only can prefab homes potentially save you around 20%-40% initially and in the long run, but they also offer the added benefits of flexibility and sustainability. However, just because something is easier on the pocket doesn't always make it the best choice.

You don't get any appreciation or resale value from these homes, making them really not worth it from an investment point of view. Secondly, the housing market in general is still built around traditional homes; it accommodates prefab homes for sure but doesn't prioritize them in any way. Now, that may change in the coming years as they become more mainstream, but that will probably take a long time unless big players like Amazon go all out.

Moreover, the average age of a Canadian home buyer is between 33 to 36 years, and detached homes/single-family residences are the most sold properties in Canada (around 53% of the market). This suggests that buying a home in Canada is more of an "I am going to start a family" kind of decision. And when you are starting a family, the house is not the only thing to consider. Neighborhoods, schools, highways, crime rates, nearby amenities, etc., all play a major role. You can surely do that with prefab homes by researching the place where you will set up, but at that point, aren't you just buying a lesser home with a lot more legwork?

Ultimately Prefab homes still have a long way to go in the housing market but that doesn't exclude them from being a viable option especially if you are not a "family man" yet. Just make sure to do your research and connect with experts like that of The Canadian Home before making a decision.