The decision by Treasurer Jim Chalmers in last month’s Federal Budget to limit negative gearing sent a predictable wobble through the property market and wider economy. CBA revised its house price forecasts down by roughly two percentage points. Commentators clutched for familiar arguments about dwindling supply and flagging demand.  

Anecdotally, the frenzy of property speculation that has accelerated prices for over a decade had waned, with home opens quieter and auctions more civilised.  

Concurrently, steps are being taken by both the Commonwealth and WA governments to induce greater housing supply, most notably through a range of innovative manufacturing and delivery methods. 

The concern, in some circles, was that any major uplift in housing supply would compound pressure on established property values. If the budget was already expected to soften prices, surely more homes in the ground would push them lower still. 

It is a reasonable anxiety, particularly for the majority of Australian homeowners who mortgage a single residence with a hope that is accrues in value steadily.  

It is also, largely, a misreading of how modern methods of construction can actually work in our housing market. 

Modern methods of construction (MMC), a term covering factory-built modules, prefabricated panels and hybrid approaches that shift the heavy lifting of home building away from site and into a controlled manufacturing environment, is not a novel proposition. European developers and builders have been utilising offsite manufacturing, precision engineering and scaled output to deal with limited space and seasonality to their construction windows.  

The Productivity Commission estimates these methods can reduce construction costs by up to 20 per cent and cut build times by up to 50 per cent. A 2026 report by CEDA makes the case bluntly, “Australia faces a shortfall of between 200,000 and 300,000 dwellings against the National Housing Accord target of 1.2 million new homes by 2029, and cannot build its way out using the same methods that created the problem.” 

The key point that tends to get lost in the supply debate is that MMC does not primarily produce substitutes for established housing. It excels at delivering the type of housing the traditional construction sector struggles to produce affordably, notably medium-density infill, accessible and adaptable housing for ageing populations, worker accommodation in regional and remote areas, and social and affordable housing delivered at impactful scale.  

These are parts of the housing market, particularly in WA, that are genuinely absent and desperately needed. 

That distinction matters enormously for existing property owners. The anxiety about supply-driven price erosion is most valid when new stock directly competes with established homes in the same market segment. MMC-delivered housing rarely does.  

Done well, it expands the total housing system by adding new typologies, meeting demand that existing stock cannot address and accentuating the attractiveness of locations nearby transport hubs and other town centre infrastructure. It does so in locations and at price points that complement rather than cannibalise the established market. Existing owners, far from being threatened by a better-functioning supply system, have every reason to support one. 

There is a detail in the budget reform that deserves more attention than it has received to date. New builds remain fully eligible for negative gearing and a capital gains tax discount. Investor capital being redirected away from established properties now has a structural incentive and a natural destination. 

This is where MMC becomes genuinely strategic. If the regulatory framework is right, that redirected capital should flow toward exactly the kinds of new supply the market needs most. Investors who previously cycled through established stock for the tax benefit now have a clear reason to back new development.  

The question is whether that development will be good development, diverse, well-located, and suited to emerging demand, or a repeat of the speculative apartment cycles that have periodically undermined confidence in new-build stock. 

The Federal Budget included new agreements with states and territories to support MMC uptake, which Western Australia has been quick to support. New South Wales has gone further, introducing legislation that would, for the first time in Australia, define prefabricated buildings in legislation and integrate them directly into the planning and approvals pathway. 

For proponents, developers, and community housing providers, the implication is clear. Manufacturing investment and the policy architecture is moving faster than WA’s regulatory environment. Those who engage early with government on what a fit-for-purpose approvals pathway looks like in in WA will be positioned to move when the framework arrives. Those who wait for certainty may find the market has already been shaped without them.

Image Source: ABC Australia