Industrialized Housing Will Advance Rapidly in China

Prefabricated modular housing—also called integrated housing—builds homes with industrial production methods: some or all components are prefabricated in a factory, then transported to the site and assembled with reliable connections. In Europe, the United States, and Japan this is known as industrialized housing or industrialized residential construction. Prefabricated modular housing mainly follows four development models: prefabricated reinforced-concrete structures, prefabricated timber structures, prefabricated lightweight steel structures, and prefabricated container houses.

In recent years, low-carbon, green, ecological, and environmental goals have strongly influenced real estate. Second, China's 12th Five-Year Plan called for a shift in the growth model. Third, the country set a target of about 10 million square meters of social housing each year, creating major room for housing industrialization. Fourth, labor costs have risen quickly over the past one or two years—reportedly doubling in some places. That directly affects our housing industry, namely prefabricated modular construction. From a traditional view, performance expectations for homes keep rising. Under those conditions, conventional building methods lead to many problems—including units that fail handover inspection. Prefabricated modular housing can largely address that.

Taken together, these factors give real estate a strong push. Over the past few years, China's housing industrialization has changed markedly: policy, technology, and the market have all reached turning points. From that angle, the next several years should see substantial further growth.

First, integration. Our technology now needs to be integrated. A home involves many technical systems; some options are excellent, others weaker. When they are combined, the challenge is true intensification. We also need integration between components and projects. Many people wonder why there is no single charger that solves every problem. Housing is similar: each producer makes different product styles and forms, so many parts cannot connect, and components must be aligned with projects. We are also forming an Asia-Pacific industrialization alliance, and Vanke has formed a housing industrialization alliance. More alliances like residential industry groups will appear, and a wide range of companies will move in that direction. Third, advancement: from the government side, much has been done in recent years—national demonstration projects and housing-performance certification. China currently has more than 200 Comfortable Housing demonstration projects.

There are currently 19 residential industry bases nationwide. The first type is formed by real-estate enterprise alliances; the second by component manufacturers' alliances; the third by pilot cities. There are already 19, and promotion will expand this year. China should also learn from Japan, which offers useful experience. One area Japan does well is relying on leading enterprises that drive housing industrialization through demonstration—carrier-like firms that push industry development. Another challenge is breakthrough: many ask whether we will see major macro-level policy moves like those of 1998–1999. Without a significant breakthrough in fiscal and macro policy, the pace of prefabricated modular housing will still be constrained. We can already see that Beijing has issued guidance on advancing housing industrialization (i.e., prefabricated modular housing). Vanke, as the first pilot project, received a 3% building-area subsidy. This year it is also possible that when bidding on a land plot, the plot will be designated only for prefabricated modular housing—if a company cannot deliver that, it cannot bid. A further difficulty is how to motivate enterprises. China's share of fully finished (fit-out) homes is still relatively low; raising that share is closely linked to prefabricated modular housing.

In sum, China's housing industrialization (prefabricated modular construction) is a train headed for spring that has already entered the fast lane. In the years ahead, industrialized housing will no longer be a dream. We can look forward together to rapid advances in housing industrialization.

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