GST relief on new homes could save 1st-time buyers up to $240 on mortgages: report
OTTAWA – A new analysis says first-time Canadian homebuyers could save up to $240 on their monthly mortgage payments through the federal government's proposal to waive the sales tax on new builds.
Desjardins Economics says in a new report that the impact on housing affordability will be 'particularly strong' for buyers in Canada's more expensive markets, like Toronto and Vancouver.
The Liberal government has tabled legislation 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 substantially renovated unit.
For homes sold above $1 million, the GST relief is phased out as the price tag nears $1.5 million.
But Desjardins also cautions that the policy could drive up demand for housing, which in the near-term could push up home prices if not coupled with other efforts to boost supply.
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Parliament has yet to pass the legislation, which the Liberals introduced alongside the government's pledge to cut income taxes starting July 1.
This report by The Canadian Press was first published June 9, 2025.
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Published Jun 09, 2025 • 3 minute read The Liberal plan to give first-time homebuyers a tax break on a newly built home could have substantial impacts on housing affordability, a new analysis finds. Photo by Shutterstock OTTAWA — The Liberal plan to give first-time homebuyers a tax break on a newly built home could have substantial impacts on housing affordability — with a few caveats — a new analysis finds. This advertisement has not loaded yet, but your article continues below. THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY Subscribe now to read the latest news in your city and across Canada. Unlimited online access to articles from across Canada with one account. Get exclusive access to the Toronto Sun ePaper, an electronic replica of the print edition that you can share, download and comment on. Enjoy insights and behind-the-scenes analysis from our award-winning journalists. Support local journalists and the next generation of journalists. Daily puzzles including the New York Times Crossword. SUBSCRIBE TO UNLOCK MORE ARTICLES Subscribe now to read the latest news in your city and across Canada. Unlimited online access to articles from across Canada with one account. Get exclusive access to the Toronto Sun ePaper, an electronic replica of the print edition that you can share, download and comment on. Enjoy insights and behind-the-scenes analysis from our award-winning journalists. Support local journalists and the next generation of journalists. Daily puzzles including the New York Times Crossword. REGISTER / SIGN IN TO UNLOCK MORE ARTICLES Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account. Share your thoughts and join the conversation in the comments. Enjoy additional articles per month. Get email updates from your favourite authors. THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK. Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Get email updates from your favourite authors Don't have an account? Create Account 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. Your noon-hour look at what's happening in Toronto and beyond. By signing up you consent to receive the above newsletter from Postmedia Network Inc. Please try again This advertisement has not loaded yet, but your article continues below. '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. Read More 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. This advertisement has not loaded yet, but your article continues below. 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% 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. This advertisement has not loaded yet, but your article continues below. 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 advertisement has not loaded yet, but your article continues below. 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. Toronto Blue Jays Olympics Columnists Toronto & GTA Editorial Cartoons
