GST relief for new homes can save $240 on mortgage loans for first-time home buyers: Report
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The Liberal government introduced legislation on June 5 to eliminate new home sales of GST’s first-time home buyers, which cost up to $50,000 for new construction costs or largely renovated units.
For homes sold over $1 million, GST relief was eliminated because the price was close to $1.5 million.
Desjardins Economics said in a report released Monday that if Canadian home buyers can save $240 in monthly mortgage payments for the first time, if they are going to buy a new home with full tax of $1 million, including taxes (tax). The required down payment will also be smaller.
Some developers charge sales tax expectations, so they are not included in the mortgage principal when purchasing.
“For these homes, eliminating GST will help potential buyers reduce upfront end costs, thus helping them get started as soon as possible,” said Kari Norman, an economist at Desjardins.
She believes that the impact on housing affordability will be “especially strong” for buyers in Canada’s more expensive markets, such as Toronto and Vancouver, where homes typically cost more than $1 million for $1 million.
The new policy goes far beyond existing discounts for new homes, which is open to first-time home buyers, but has long been capping homes with prices of up to $450,000.
Norman estimates that nearly 85% of new buildings in Canada will receive all $50,000 in GST relief quality in the new proposal.
About 92% of new buildings in Toronto are eligible for full or partial tax relief for up to $1.5 million. However, only 75% of the new units in Vancouver will be eligible, as the highest scores in the qualifying price range are many.
Desjardins recommends the new policy index sets inflation-eligible home prices to avoid future erosion of affordability.
The federal government predicts that GST rebates will cost about $3.9 billion in five years, while parliamentary budget officials estimate that the price tag is close to $2 billion in the same time frame.
The difference between these numbers may indicate that the federal government expects more new buyers to take advantage of the discount, and therefore, the boom in home buying and construction is greater, Desjardins said.
The report said demand stimulated by the policy could lead to a surge in new buildings in Canada.
The kickbacks also emerge in Canada’s construction industry facing serious obstacles to ground shovels: high financing and construction costs, regulatory delays, labor and uncertainty about builders related to Canada’s trade war with the United States.
The report also warns that some developers foresee increased purchasing power that could increase their own materials and labor costs in response to the policy, which would undermine any gains from affordability.
The report said that in the short term, housing needs related to GST rest are higher, if no additional efforts are added to raise housing prices to increase supply and construction pace.
This could be the introduction of a policy that policies the demand for new construction, but, Desjardins noted, a particularly soft apartment market in cities such as Toronto could benefit from an increase in buyer appetite.
Parliament has not passed the legislation, which applies to homes purchased between May 27 and 2031. Construction of qualified housing needs to begin by 2031 and be completed by 2036.
The measure is one of a set of proposals included in the Liberal platform during the spring federal election, the same legislation pledging to reduce income tax cuts, which is scheduled to take effect on July 1.
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Last modified: June 9, 2025
