Prefabricated housing market in Central and Northern Europe on the rise

Prefabricated housing demand is on the rise, as the building technique’s advantages are increasingly being leveraged by new home buyers in an improving economic and demographically charged marketplace. By 2022, an estimated 70,100 units will be sold across six Northern European countries, with German demand representing a sizeable level, particularly for turnkey solutions. 

The prefabricated housing market is picking up across Europe, as people increasingly focus on turnkey solutions that tick all the modern boxes. Acceptance of the manufacturing form, as well as ease of planning and consent processes, are expected to further boost demand. Meanwhile, the demand for better quality homes – from a sustainability standpoint – can be more easily met with well-developed prefabricated options.

To better understand the market changes, Roland Berger recently released its ‘Prefabricated housing market in Central and Northern Europe’ report about the industry. The research covers six Europeans markets, including Germany, Scandinavia, the UK, Austria, Switzerland and Poland, with market projections until 2022. The study considers 1 + 2 family homes, with prefabrication of major parts which are then assembled at the building site.

The study shows that price is a major driver in the adoption of prefabricated housing, with all countries noting an impact from the factor. The relevance of price as a factor, quite ostensibly so, lies in the correlation between wages and material prices to the price. In essence, in economies where wage-levels are on an upward trajectory, prices immediately see corresponding increases.

Another key factor in the adoption of prefabricated housing is the ease of the building type, being perceived by most respondents as a ‘one-stop shop’ solution for housing. The factor was noted to have considerable influence in almost all countries, although the attractiveness of easy building appeared to be of less importance in Poland than in other countries.

Planning security, which entails the availability of enough information to rely on in terms of budget requirements and completion dates, was another factor that saw broad recognition across all the markets surveyed. Prefabricated housing holds the advantage in this domain due to the ability of these houses to be built rapidly, and often in accordance with clearly defined timelines. 

As mentioned above, the acceptance of prefabricated housing, or what the report terms as 'Technological acceptance,’ is of key value in the development of the new housing technique, although classified as a factor of lower relevance by the report. Nevertheless, the fact that these houses are viewed as modern is a big plus in this domain.

Meanwhile, population growth was also found to impact the market, although GDP development remains a key market force, in light of the fact that most countries are expecting strong growth in years to come. According to the report, growth of the GDP in the short-term is one of the most accurate proxies for the construction development sector.

Prefabricated market volume

The prefabricated housing market has enjoyed steady growth over the past four years, up by 6.1% compound annual growth rate (CAGR) between 2014-17. The UK was the strongest market, jumping by 12.2% CAGR to around 12,000 units in 2017. Germany remains the stronger market in terms of absolute numbers, totaling 25,000 units in 2017.

The growth of the market is projected to be relatively robust going forward, with CAGR of 3.2% between 2017-22. The UK market is projected to slow to 3.8% CAGR over the period, totaling 14,700 new units by 2022, while Germany will see a total of 29,600 units per year produced in 2022. In total, the market will cross 70,000 units by 2022, according to the firm’s projections.

In terms of value, the total market size saw strong growth of 9.7% between 2014-17, from €10.8 billion to €14.2 billion. The UK led the growth, up by 15.4% on average over the same period, reaching a value of €3 billion, while Germany saw slower growth of 8.1% CAGR over the period to reach €5.2 billion.

The market growth is projected to slow in terms of value, but remains relatively strong, expected to increase by 6.4% CAGR to 2022. Strong performances are expected in the UK, increasing at 7.1% CAGR, and Scandinavia increasing at 7% CAGR till 2022. Total value of the housing market as a whole will increase to €19.4 billion.

The German market 

The German market is set to see its market share of prefabricated 1+2 family housing increase from 20.8% in 2014 to 23.5% in 2022. Turnkey models will be the most significant segment in terms of growth, totaling 11,600 of the 29,600 units, followed closely by floor-covering models. Timber frames are by far the most common building type, representing 25,400 of the total units completed in 2022. The relative value of the housing segment will largely fall in the €150-250,000 range, although the >€250,000 segment will see the strongest growth, at 9.8% from now until 2022.