Public servants will not be alone in eyeing Finance Minister Jim Flaherty with a mixture of dread and anticipation as he tables the federal budget Thursday.
Ottawa realtors and home builders hope Flaherty will take a gentle approach.
“The big question is just how bad is it really going to be?” said John Herbert, executive director of the Greater Ottawa Home Builders’ Association.
A recent report released by the Conference Board of Canada shows new home construction dropped by 10% in 2011 and the board forecasts a continuing decline.
“We’re deeply concerned,” Herbert said.
Belt-tightening budgets reduce demand for new homes, putting a damper on an industry that Herbert said employs 35,000 people in Ottawa and generates $3.5 billion in economic activity.
When the Liberals cut deep in 1995, Herbert said new home construction fell off by about three-quarters, leading to bankruptcy for some building firms and a three-year recovery period.
“The degree of impact will determine just how quickly things bounce back,” he said.
“The feeling I get right now is that it’s not going to be as quick as we might all like.”
Shore-Tanner and Associates analyst Barry Nabatian said construction is a key economic indicator because about three people have to work to create one full-time construction job.
“So therefore housing represents a great deal of jobs and of course a great deal of investment,” Nabatian said.
A lot will depend on how public service cuts are implemented.
If jobs are reduced mainly through attrition, “I don’t think it will change our economy that much,” he said.
Remax realtor John Donald is less worried about the budget, thanks mainly to low interest rates that have kept the Ottawa real estate market humming.
“Since 2008, prices have continued to rise,” he said. “So even worldwide global economic stuff does not affect this market per say.
“But a budget that lays off federal workers will.”
It took about three years for the real estate market to rebound after the 1995 bloodletting; this time Donald foresees a quicker recovery of about a year “just while things sort themselves out.”
His optimism is shared by Ansel Clarke, president of the Ottawa Real Estate Board, who noted that sales and housing prices were up last year despite talk of austerity.
“The demand for housing is still there,” he said.
“As long as (the government is) not too harsh on housing, I think the market will continue along at a reasonable pace.”
Source: Ottawasun.com