Summary:
The Canadian Liberal government introduced legislation to eliminate the GST on new home purchases up to $1 million for first-time buyers, potentially saving up to $50,000 per purchase. This policy aims to improve housing affordability, particularly in high-cost markets like Toronto and Vancouver. Desjardins Economics estimates significant savings on mortgage payments and down payments, though challenges like construction costs and potential price inflation remain. The rebate applies to homes purchased between 2025 and 2031, with construction deadlines extending to 2036.
What This Means for You:
- Lower upfront costs: First-time buyers could save up to $50,000 on GST, reducing closing costs and mortgage burdens.
- Regional impact: Buyers in Toronto and Vancouver stand to benefit most, with 85-92% of new builds qualifying for full or partial relief.
- Act quickly: The policy applies to purchases made by 2031, but construction must start by then and finish by 2036.
- Watch for price adjustments: Developers may raise costs in response to increased demand, potentially offsetting affordability gains.
Original Post:
By Craig Lord
The Liberal government introduced legislation on June 5 to eliminate the GST portion from new home sales of up to $1 million for first-time buyers, which works out to as much as $50,000 off the cost of a new build or a substantially renovated unit.
For homes sold above $1 million, the GST relief is phased out as the price tag nears $1.5 million.
Desjardins Economics said in a report released Monday that first-time Canadian homebuyers could save up to $240 on their monthly mortgage payments if they were to buy a new home with an all-in, tax-included price of $1 million. The required down payment would also be somewhat smaller.
Some developers charge the sales tax upfront, so it’s not rolled into the mortgage principal at the time of purchase.
“For these homes, eliminating the GST will help prospective buyers reduce upfront closing costs, helping them get their foot in the door sooner,” said the report, authored by Desjardins economist Kari Norman.
She argued the impact on housing affordability will be “particularly strong” for buyers in Canada’s more expensive markets, like Toronto and Vancouver, where homes are routinely priced above the $1-million mark.
The new policy takes a big step beyond the existing New Housing Rebate, which is open to more than just first-time buyers but has long been capped at homes priced up to $450,000.
Norman estimates that nearly 85% of new builds in Canada would quality for the full $50,000 GST relief in the new proposal.
Roughly 92 per cent of new builds in Toronto are expected to qualify for full or partial tax relief for homes priced up to $1.5 million. Only 75% of new units in Vancouver would qualify, however, as many top out of the qualifying price range.
Desjardins recommends that the new policy index the price of qualifying homes to inflation to avoid future erosions in affordability.
The federal government predicts the GST rebate will cost about $3.9 billion over five years, while the parliamentary budget officer estimates the price tag is closer to $2 billion over the same time frame.
Desjardins said the discrepancy between the figures could indicate the federal government anticipates more new buyers taking advantage of the rebate, and a bigger boom in homebuying and construction as a result.
It’s possible that increased demand spurred by the policy also leads to a surge in new building in Canada, the report said.
The rebate also comes at a time when the Canadian construction industry faces serious obstacles to getting shovels in the ground: high financing and construction costs, regulatory delays, an aging workforce and uncertainty among buyers and builders tied to Canada’s trade war with the United States.
The report also warns that some developers, foreseeing increased buying power, could raise their own costs for materials and labour in response to the policy, which would undermine any gains in affordability.
Higher demand for housing tied to the GST break could, in the near-term, push up home prices if not coupled with other efforts to boost supply and the pace of construction, the report said.
This might be the ideal time to introduce a policy that stokes demand for new builds, however, as Desjardins noted a particularly soft condo market in cities such as Toronto could benefit from an increase in buyer appetite.
Parliament has yet to pass the legislation, which would apply to homes bought between May 27 through to 2031. Construction on qualifying homes would need to start before 2031 and finish by 2036.
The measure, one of a suite of proposals included in the Liberal platform during the spring federal election, is packaged in the same legislation as the promised income tax cut, which is set to take effect July 1.
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The Canadian Press
Last modified: June 9, 2025
Extra Information:
Finance Canada provides official details on tax policies, including GST rebates for new homebuyers.
CMHC offers resources on housing affordability and first-time buyer programs.
People Also Ask About:
- Who qualifies for the GST rebate? First-time buyers purchasing new builds or substantially renovated homes priced under $1.5 million.
- How much can I save? Up to $50,000 for homes under $1 million, with phased reductions up to $1.5 million.
- When does the policy take effect? Applies to purchases made between May 2025 and 2031, with construction deadlines extending to 2036.
- Will this increase home prices? Potentially, if demand rises without a corresponding increase in supply.
Expert Opinion:
Kari Norman of Desjardins Economics highlights that while the GST rebate improves affordability for first-time buyers, its long-term success hinges on addressing construction bottlenecks and preventing speculative price increases. The policy’s regional disparities—favoring Toronto over Vancouver—underscore the need for localized housing solutions.
Key Terms:
- GST rebate for first-time homebuyers
- Canadian new build home tax relief
- Housing affordability Toronto Vancouver
- Federal GST exemption new construction
- First-time buyer savings 2025-2031
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