For construction policies to be effective and efficient, an integrated and systematic approach, with which the effectiveness of alternative policies can be examined in advance by anticipating the private sector’s response and subsequent changes in the industry environment is needed. As an effort to address this issue, a model-based approach is presented for construction policymaking and an example of a prefabrication policy in Singapore is given. In this study, the policy models developed using system dynamics simulate the performance of the Singapore construction industry and examine the effectiveness of alternative prefabrication policies in a qualitative and quantitative manner. Having obtained policy implications from the model structures and simulation results, policy initiatives are suggested along with discussions on the associated potential risks. Based on the research findings, we could conclude that a model-based approach is helpful in developing an effective construction policies by providing policymakers in a government or corporate with an integrated view on the policy application process and a tool to examine alternative policies in a systematic manner.