PROPERTY

Alternative housing the upshot of the high cost of property

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Because mainstream housing in Australia is among the world's most expensive, more and more people - both young and old - are locked out of home ownership.

Less conventional options, such as prefabricated, trailer and container homes, are far cheaper alternatives, and many can leave buyers with change from $100,000.

But they are not without their problems, such as obtaining finance to buy them. And for those who need to be within travelling distance of work, finding affordable land for their cheaper homes can be difficult.

cargo-container

For retirees, who have driven a boom in trailer parks, neither of these factors is usually very important.

Many are downsizing from family homes to free up cash and supplement their age pension or super, and they will pay for their new home outright.

Others are moving from rentals, no longer needing to live close to jobs, and can use all or part of their super to secure an affordable home.

The increase in permanent residence in caravan parks is changing the perception that they are just destinations for holidaymakers.

Many are being relabelled manufactured housing estates (MHEs).

Prices for demountable or modular homes on MHEs, some earmarked for over-50s, start at $50,000-$150,000 for one- and two-bedroom second-hand properties, rising to more than $300,000 for a new three-bedroom home.

Once you have bought your modular home in an MHE, you usually pay a ground rent to the operator.

These fees vary but in NSW, for example, they range from $115 to $150 a week, according to residentialparkliving.com.au.

The demand from over-50s for caravan park homes has been strong.

International real estate broker Colliers estimates it will increase nearly 30,000 additional units by 2026, almost a 40% rise on the 2011 level.

That could surge to almost 50,000 extra units over the same period if demand increases at a "moderate level", as has happened in more mature overseas markets, says the broker. A number of listed companies offer investors an opportunity to invest in this sector.

For example, Ingenia (ASX code INA) has sold traditional retirement villages and bought 15 parks since entering the sector in early 2013.

At the other end of the spectrum, young singles or families struggling to afford a conventional home can buy a modular or a container home far cheaper.

But they have to overcome the twin hurdles of financing the purchase and finding affordable land.

A solution to the land problem for some is their parents' backyard. If the block is large enough for a granny flat, this can provide a great first home.

Even better if mum and dad pay for it and allow you to live rent-free until you save a deposit to buy your own place.

If the granny flat is built on-site, it's likely you will be able to finance it with a regular construction loan from a bank, says Jessica Darnbrough, from Mortgage Choice.

Construction costs vary but a 30sqm one-bedroom building was quoted at $74,000 on grannyflatfinder.com.au.

A similar sized container home would cost around $21,000 - or $700 a square metre - says Jamie Van Tongeren, the CEO of Container Build Australia, plus around $16,000 for added costs such as transport, utility connections and council fees.

The total of $37,000 represents a considerable saving.

But you won't be able to obtain a bank mortgage on the property until it is finished on-site, Darnbrough says.

The same rules apply even if you own the block of land where the home is to be sited. In the meantime, you will have to pay the company building your home in its factory.

Some companies have ties with non-bank lenders and can organise finance, Darnbrough says.

Once the home is on-site you may be able to refinance to a cheaper mortgage, if the original loan allows it.

Alternatives include saving enough to pay for the building upfront or taking a personal loan and refinancing to a mortgage on completion.

No place like a container home

  • $2000: starting price for a single second-hand container with door and window frames cut out.
  • $3500 for a new container.
  • $20,000-$30,000 for a basic model with bathroom and air-conditioning.
  • $50,000 for a two-bedroom home.
  • $300,000-plus for a large designer home.

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Money's founding editor Pam Walkley stepped down in early 2015 after more than 15 years at the helm. Before that she was at the Australian Financial Review for 11 years, holding several key roles including news editor, chief of staff and property editor. Pam is now a senior writer for Money.
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