A struggling economy and a weak real estate market mean many Canadians will save their money rather than buy and renovate homes this year. However, recently announced government incentives could be the push some Canadians need to make their move sooner rather than later, real estate experts said on Wednesday.

Canadians are currently very hesitant to enter the real estate market, said Adrienne Warren, senior economist and real estate specialist with Bank of Nova Scotia at the bank’s Canadian Real Estate Outlook and Trends Forum in Toronto

“Buyers, for the time being, are just on the sidelines,” she said. “They’re concerned about their job markets, they’re concerned about their portfolios and they’re going to be staying out of the market until they see some stabilization — and stabilization in home prices as well.”

Canada’s housing market peaked in the second half of 2007 and has now entered its second year of decline, according Phil Soper, president and CEO of Brookfield Real Estate Services. He expects the current correction to last through much of 2009, with a recovery in home sales likely to begin in the fourth quarter.

But even prior to then, Soper expects some of the federal government’s recent initiatives, particularly targeting first-time homebuyers, to bolster industry activity.

“Governments are taking action to try to make it easier for people to get into the market,” he said. “This is going to have an important impact.”

The increase in the RRSP homebuyer withdrawal limit to $25,000 from $20,000, for instance, represents a considerable incentive, according to Soper.

“It’s a fairly significant change in terms of public policy,” he said, adding it represents the first change to the Homebuyers’ Plan in 16 years.

Soper also pointed to the first time homebuyers’ tax credit and the land transfer tax credit as encouraging initiatives that could prompt first-time buyers to make a move at a time when many are waiting on the sidelines.

First-time buyers represent a significant part of Canada’s real estate market, Soper said. The demographic currently comprises roughly 40% of all transactions, down from about 70% at the peak of market expansion.

“They’re very, very important to the overall health of any real estate market,” he said.

Lower home prices and historically low mortgage interest rates, Soper added, will also give homebuyers incentive to enter the market this year.

The home renovation tax credit introduced in the 2009 budget could also positively impact activity in the real estate market, Warren said.

“There is the potential for this credit to provide a boost to the industry,” she said. “People who have been looking to make that investment might pull that forward to get in ahead of the February deadline.”

But despite any relief government stimulus might provide, the real estate industry is in for a difficult year.

Scotia Economics expects the volume of home resales, which fell 17% last year, to drop another 15%-20% this year. The bank predicts that average house prices will fall another 10%.

But the Canadian real estate market is far less troubled than the U.S. market, which has already seen resale volumes fall by 40% from their peak.

Warren Jestin, chief economist at Scotiabank, added that the Canadian economy overall is in much better shape than the U.S. economy.

“On average, we will do better than the U.S. this year and have a good chance of doing better next year,” he said.

Jestin expects the Canadian economy to begin to recover next year.