Australians just aren't building enough homes to kick-start a slumping housing market, according to new research.
The Housing Industry Australia's National Outlook report found construction activity had dropped by 11.2% during the first half of 2012.
It predicts levels will reach GFC lows in the second-half of 2012.
"That situation now appears unavoidable, to the detriment of thousands of businesses and households, not to mention the overall domestic economy," said HIA's senior economist Dr Harley Dale
The HIA only recently announced GFC-level lows would be experienced in the amount of new home loans being approved.
“We needed to be seeing a strong recovery in new home lending coming through in the first half of 2012 to signal a significant turnaround in residential construction from what will historically be a very low trough,” Dale said at the time.
With the latest report confirming the decline in construction figures, the HIA now claims tax reductions are needed to stimulate confidence.
"Around $200,000 of the price of a new home is due to taxation. It’s an unsustainable situation,” said Dale.
“To improve the conditions facing new home building not only requires further interest rate cuts, but also Commonwealth and state government action to boost confidence and lift a substantial portion of the tax burden from new housing."
However, HIA did report an increase in building approvals in May, which suggests borrowers' lack of confidence alone could be a stumbling block.