Australia is likely to fall short of the one million new homes the Federal Government hopes to be delivered within the next five years.

Forecasts by the Housing Industry Association predict work will start on only 970,000 new homes during the period.

The HIA’s National Outlook Spring 2022 report warns further interest rate increases could impact on the number of new homes delivered, which will put upward pressure on house prices and rents.

It says longer construction times are already slowing the delivery of new apartments and that will become worse if further rate rises affect investment.

“If the RBA continues to increase the cash rate in 2023, this forecast will be downgraded, and the challenge of building one million homes will become increasingly difficult,” it says.

HIA senior economist Tom Devitt says a solution could be to give grants to local governments to help expedite land releases. This, he says, will effectively reduce prices and encourage house and land purchases.