Ontario Premier Dalton McGuinty's top priorities in the upcoming 2009 budget should be job creation and infrastructure projects in an effort to stave off a devastating slowdown in the economy, according to the province's property developers.
A survey by the Ontario Home Builders' Association found more than a third of builders expect to lay off staff for 2009.
"People will continue to work and we can ensure adequate roads, transit and residential services are upgraded and expanded," OHBA president Frank Giannone said.
Job creation, infrastructure spending and personal and corporate tax reductions were the top three priorities identified by home builders. A balanced budget was in fourth place. Financing in tight credit markets was another issue.
About 47 per cent of home builders surveyed said availability of financing was down. A third also said they had difficulty financing new home and renovation projects.
Meanwhile, separate reports released yesterday show the housing market hasn't hit bottom yet.
"Issues affecting the overall economy are impacting housing markets across the country and the situation is not expected to be remedied until consumer confidence is restored," ReMax Ontario Atlantic Canada executive vice-president Michael Polzler stated in a report.
ReMax is forecasting average prices across Canada will fall 3 per cent this year and 2 per cent next year to $293,000.
Other forecasters however, are taking a gloomier view.
Carl Gomez, vice-president of research for real estate consultants Bentall Investment Management, said prices have to fall nationally by at least 10 per cent from their peak to return to normal valuations. In Alberta and British Columbia, where prices have gone up a lot quicker than the national average, values may have to fall by as much as 30 per cent. However, prices may fall further than that as the market seeks to correct itself, Gomez stated in a report released this week.
"All markets in Canada are facing deteriorating economic conditions that are likely to either accelerate or cause a larger than required cumulative decline in house prices."
Prices in Ontario are about 10 per cent overvalued, but could fall further depending on economic conditions, Gomez stated.
"The recent deterioration of macro economic conditions and the potential for deflation to affect all asset prices in the current environment could potentially result in Ontario home prices falling by even more than the expected 10 per cent," Gomez stated.
Globally, Canada is in better shape than other industrialized countries because home prices increased far more moderately, by about 80 per cent between 1997 and 2008, according to the report.
By contrast, Britain and Spain saw increases of 200 per cent in the same period. United States house prices jumped 190 per cent between 1997 and 2006 before crashing in 2007.
Another, tough-minded report yesterday by the Center for Economic Policy and Research in Washington says U.S. house prices must fall further to stabilize the market.
"Prices in many markets are still hugely out of line with trend levels," it said.
"As long as house price remains inflated there is no way that the market can stabilize since there will continue to be a large excess supply."
The best way to stabilize house prices is to deflate the bubbles by allowing government-sponsored enterprises such as Fannie Mae and Freddie Mac to refuse to buy mortgages in markets in which house prices are out of line, said the U.S. report. ."