Australian demand for construction or improvement of home building has declined in August as higher interest rates turned off would-be borrowers.

Permits for renovation and new construction of apartments has slid 4.7 percent on a monthly basis from July, according to the report of the Bureau of Statistics released in in Sydney today.

Australians, who wanted to build their own homes slipped by 4.3 percent to 8,208 from July. Those who applied for renovations rose by 1.4 percent to 4,313 from the month of July.

"Looking further into 2010, we expect to see more volatility in building approvals as the RBA taps on the brakes by hiking the cash rate,"

David Cannington, an economist at Australia & New Zealand Banking Group Ltd. in Melbourne, said in an interview with Bloomberg that one can expect more volatilities in Australia's real estate sector as an effect of upward movements in the country's interest rates.

A steadily growing Australian economy would likely call for two interest rate increases before the year ends, the futures market has anticipated based on the Reserve Bank of Australia's economic outlook.

The said upward movement of interest rates will likely factor in the two scenarios likely to occur as the pace of economic growth continues in the near term.

According to the RBA, the two interest rate increases factored in by the futures market will likely strike a balance in the management of the money supply, the slower population growth, and the potential of lower unemployment rates that will likely coincide with the economy's boom.