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Australia has experienced a dramatic rise in housing prices over the past decade. Data from the , median house prices across major cities have risen substantially, with prices in Sydney soaring to a staggering $AU1.3 million.

Canberra, Melbourne and Brisbane followed closely. Those median prices sit at $AU980,000, $AU840,000 and $AU830,000 respectively.

Compared to other countries, —we now lag behind countries like the U.S. and the U.K.

And other housing affordability metrics in Australia continue to paint this grim picture.

The house price-to-income ratio , nearly double what it was in 1990, and significantly higher than in 2020.

Affordability for median-income households reflects a similar trend, with to them, down from 40% in March 2022.

Another key indicator we use to look at affordability shows the number of years to save a 20% deposit now exceeds 13 years in Sydney, followed by 11.8 years in Hobart and 10.9 years in Brisbane.

Additionally, the percentage of household income required to service a new mortgage has also risen across , which has doubled since 2019.

All of these metrics tell us just how much Australia's housing affordability has deteriorated over the past few decades.

But before we explore possible solutions, we need to first understand the root causes.

The mismatch of supply and demand

The housing issue is shaped by a complex blend of factors, including rising demand, .

One key driver is the mismatch between supply and demand, particularly in rapidly growing urban centers.

With almost , economists point to .

In response, governments at all levels have , an ambitious target that requires a 40% increase in annual housing delivery over the next five years.

Despite this promise, there are growing concerns about whether this target is really attainable, particularly with the current approaches to housing construction.

Many housing experts warn that new supply is likely to fall short, .

In the current Australian housing discussion, the opportunities presented by new business models are largely missing.

For example, some approaches could be inspired by —where instead of selling the land itself, governments or developers sell land as a service, packaging access with maintenance and infrastructure, perhaps on a lease.

If combined with , a smart building method that enables faster, cost-effective construction, it could transform the housing market and help meet the ambitious housing targets.

But how can they be applied in Australia?

Rethinking the way we 'own'

Servitization models present a new way of thinking about ownership by shifting the focus from ownership to access.

If we think about the concept in terms of housing, this could enable local councils to respond to urgent housing demands by leasing undeveloped land temporarily.

In particular, this approach can help rapidly deploy temporary homes in response to disaster relief and low-income housing. Ideas like peppercorn rent schemes— —mean councils could temporarily meet housing demands.

Land value plays a direct role in housing affordability, .

Servitization can help by distributing land costs over a certain period, drastically improving the affordability of social housing schemes, and potentially eliminating .

Combined with prefabrication, servitization could offer a holistic housing solution that integrates design, fabrication, installation and disassembly, as well as the possibility of bundling building services into the service offering.

Rethinking the way we 'build'

Prefabrication, also called modular or off-site construction, is a mode of production where building components are manufactured away from the construction site.

By manufacturing standardized and modular components in a controlled environment, this approach offers a faster, cheaper and efficient way to build. These parts are then transported to the building site and assembled like pieces of a puzzle.

Despite its , its adoption in the construction industry has remained limited.

Currently, prefabrication represents less than . Although it's estimated to reach 15% by the end of this year, we're still well behind other developed countries like .

In its modern form, prefabrication is a part of a broader, innovative business model known as

Collectively, this business model promises a range of benefits, including

Technology plays a crucial role, supporting every stage of the process from design to production and on-site assembly. By reducing lead time and increasing productivity, these technologies can help drive down costs.

A range of technological enablers, collectively referred to as Industry 4.0 technologies, include , contribute to its evolution.

The true cost-saving potential of prefab housing is realized when implemented at scale, enabling economies to drive down cost and improve affordability.

With supply bottlenecks and unmet demand, prefabricated houses can potentially boost housing supply in a short timeframe.

Bringing new business models into the housing dialogue

New business models like servitization and prefabrication hold great promise in addressing Australia's complex housing challenges.

But current affordable housing discourse tends to focus on government policies, taxation, rising costs and inadequate supply.

While these factors are important, we need to broaden the conversation to include new business models that tap into unique solutions.

At the core of the housing issue is a mismatch between supply and demand, an issue that servitization and prefabrication are well-positioned to help resolve by offering a whole housing solution on a service basis.