In the latest episode of Kapitol Conversations, we sat down with Matthew Khoo, CEO of ICD Property, and Mat Stoddart, Development Director at AsheMorgan, to talk about one of the most discussed topics in the construction industry right now: volumetric modular construction.
Volumetric modular construction involves building fully finished modules off-site, inside a controlled factory environment, and then transporting and stacking them on-site. It is not a new concept, but at scale, it has never quite landed in Australia the way it has in other parts of the world.
As Andrew Morrison, our Head of Modular here at Kapitol, explained in the conversation, prefabrication has always been part of how we work. Bathroom pods, prefabricated risers, modular switch rooms in data centres. Volumetric modular is the next evolution of that thinking, and one of the more significant steps forward in innovation in construction that we believe holds genuine potential for the residential sector and beyond.
For Matthew Khoo, the question of “why now” has a long history. ICD Property was founded in 2009 with the explicit goal of introducing modular construction to Australia. The challenges they faced then were significant: how do you design for modular from the outset? How do you certify offshore-manufactured components? How do traditional financing structures accommodate modules built before they land on site?
ICD has skin in the game beyond curiosity. The company is backed by CIMC, or China International Marine Container Group, the world’s largest shipping container manufacturer and, since 2006, the largest volumetric modular manufacturer globally. That institutional backing matters when it comes to financing, because it allows CIMC to fund up to 70% of the cost of the modules through to site completion, at which point standard project finance takes over.
Matthew’s view is that those early headwinds have not disappeared, but they have diminished. The quality conversation is largely won. The same scepticism that surrounded bathroom pods when they were first introduced has now shifted, and modular is following the same trajectory.
Both Matthew and Andrew Morrison were clear on this point: volumetric modular is not the answer to everything. It works best where there is repetition, where floor plates are consistent and typologies are standardised. Purpose-built student accommodation, hotels, build to rent, and investor-grade build to sell are the typologies that make the most sense right now.
From a residential construction perspective, Mat Stoddart put it simply: the development community is not reluctant to change, it craves certainty.
Modular offers cost certainty, programme certainty, and supply chain certainty in a market where all three are genuinely hard to find. When you can lock in a design and go into production, you remove a significant portion of the risk that is currently keeping projects on the shelf.
For student accommodation construction in particular, the opportunity is compelling. The repeatability of student room typologies, the institutional ownership structure, and the scale of demand across the country make it one of the most natural fits for volumetric construction.
The conversation did not shy away from what still needs to be resolved.
Compliance is one of the most significant. Nothing in the National Construction Code is currently deemed to satisfy for modular. Everything must be performance-based, which adds time, cost and complexity to every project. Certifiers need to understand the scope. Trades need to understand what they are connecting to. For the first few projects off the ground, that process is going to be hard.
Financing structures are evolving, but the Australian banks are still finding their footing. There are mechanisms that work, and institutions like CBA have been publicly exploring the space, but progress in this area requires the right manufacturer, the right structure, and parties willing to move together.
Regulatory inconsistency across states is another barrier. The design standards in New South Wales and Victoria differ enough to create real friction for any developer trying to build a national modular product. Without national alignment, it is difficult to achieve the scale that makes volumetric modular commercially viable. As Mat Stoddart pointed out, the UK offers a useful reference point for what government-aligned support can do to accelerate adoption, though it is also a cautionary tale: even with a larger market, some early modular businesses could not sustain the pipeline required to remain viable.
Singapore has reached above 45% of all new homes built using prefabricated or modular construction, driven in part by government mandates requiring PPVC, prefabricated volumetric construction, on a significant proportion of government land. Sweden sits closer to 80%, shaped by weather, culture, and decades of treating housing as a manufactured product.
Australia is a long way from either of those figures. But as Andrew Morrison noted, the productivity numbers are sobering on their own.
According to the Productivity Commission, we are now spending 53% more hours per dwelling than we were in 1995. The construction industry is not improving at pace. Volumetric modular is not a silver bullet, but it is one serious response to a serious problem.
Across the table, there was a shared vision. The goal is not for modular to be something you reach for when a site is distressed or a project has stalled. The goal is for it to be mainstream. For a developer to look at a site, know their product typology, know the module cost, and move with confidence. For design for manufacture and assembly to be the starting point, not a retrofit.
At Kapitol, we have spent the past twelve months building the ecosystem that makes that possible. That includes architects who understand modular design, trade partners who understand the scope, and building surveyors and fire engineers who know what they are looking at. It also means bringing clients into the conversation early, because with volumetric modular, the decisions that matter most are made long before a sod is turned. That is why early contractor involvement is so central to how we approach these projects.
The opportunity is real. The housing supply challenge in Australia is not going to resolve itself through traditional construction alone. Volumetric modular, done well, at scale, with the right partners, adds genuine capacity to the pipeline. And as volume grows and the industry matures, the cost curve follows.
We are not going to solve Australia’s housing crisis in a podcast. But these are exactly the conversations that move the industry forward.
