Property developers can expect to have a slow year ahead as the demand to renovate and build houses drop based on figures reported by Australian Bureau of Statistics.

In November, housing construction approvals declined by 4 percent contributing to an overall slowdown of 10 percent for the industry in 2010. Property analysts speculate that the construction downturn is related to the slump in real estate prices.

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During the same period, new home sales slowed down 0.5 percent while general home sales declined 16 percent in over three quarters says the Housing Industry Association.

"Generally speaking, the number of contracts signed was on a downward trend as a result of higher interest rates, lack of available finance and also the withdrawal of additional assistance to first homebuyers," HIA chief economist Harley Dale said.

ANZ property research head, Paul Braddick pointed to interest rates as the major contributing factor to the slowdown. "The main driver of the dwelling cycle has always been interest rates," he told ABC News. "In the past and with rising interest rates developers tend to have less incentive to build because prices have flattened as well."

Prospects may not be positive in the meantime but the industry is expected to turn around when rising demand puts pressure on developers.
"But in the more medium-term, I think this is adding to the shortage of dwellings that we are seeing in Australia, so at some point in 2012 or 2013 we'll have to see dwelling approvals pick back up again," Braddick said.

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