GST cut for new homebuyers could mean price hikes, bank warns
Article content
The report, by Desjardins Economics' Kari Norman, found that the federal policy to eliminate or reduce the GST on newly built homes priced up to $1.5 million for first-time homebuyers may cut upfront costs. But without a corresponding increase in the supply of homes to quell the housing crisis, the bank economists say, the federal policy may just boost demand and the home prices that the government intends to help suppress.
Article content
Article content
Article content
The report also warns that the rebate could distort the market because homebuilders might anticipate homebuyers' increased purchasing power and simply raise sticker prices on new homes. Another possible problem is that the rebate might encourage first-time buyers to rush purchases in anticipation of rising prices, Desjardins says, leading to a short-term sales spike that would likely be followed by a slump.
Article content
Article content
With the federal Parliamentary Budget Officer set to release an assessment Wednesday on the fiscal costs of the GST rebate on first-time homebuyers, Desjardins voiced concern that the policy will also mean that the benefits to buyers may be partly offset if the increased demand for homes leads to an increase in the costs of labour and building supplies.
Article content
Instead, Desjardins suggests that Ottawa mitigate the risk of demand outpacing supply by bundling the GST rebate with policies that would accelerate the pace of home building. The report says those other policies include streamlining permitting processes, investing in innovative practices, addressing skilled labour shortages and improving zoning flexibility.
Article content
Paul Smetanin, the president of the Canadian Centre for Economic Analysis, said he agrees with Desjardins' concern about the GST rebate because the policy will increase demand and prices and give developers the chance to simply increase profits.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Toronto Sun
9 hours ago
- Toronto Sun
CHARLEBOIS: Punishing Washington, one Canadian grocery cart at a time
What happens if you drink from a plastic water bottle left in a hot car Air Canada set to announce new expenses policy for passengers as restart continues CHARLEBOIS: Punishing Washington, one Canadian grocery cart at a time There's a reason only China and Canada chose counter-tariffs: Such policies weaponize the cost of living, but against one's own citizens Photo by Katherine KY Cheng / Getty Images Article content Food inflation has returned as a problem for Canadian households. According to Statistics Canada, food prices rose 3.3% in July, outpacing overall inflation by 1.6 percentage points. Unlike past cycles, this spike cannot be blamed on volatile global markets. The cause lies much closer to home — in our own policy decisions. Advertisement 2 Story continues below 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 or Sign in without password View more offers Article content Coffee prices surged 28.6%, confectionery 11.8%, and fresh fruit 3.9%, with grapes alone up nearly 30%. Since March 2025 — when Ottawa ended the GST holiday that had distorted winter data — food inflation has exceeded the overall CPI by an average of 1.4 points. A large part of this gap stems from the counter-tariffs imposed on essential imports, many of which lack viable domestic substitutes. Article content tap here to see other videos from our team. Try refreshing your browser, or CHARLEBOIS: Punishing Washington, one Canadian grocery cart at a time Back to video tap here to see other videos from our team. Try refreshing your browser, or Play Video Article content Two facts reinforce this conclusion. First, the cost of major agricultural inputs — wheat, soybeans, and corn — has been stable in recent months, as has the Canadian dollar. Second, food operates on razor-thin margins. A 10% tariff can destabilize an importer; Ottawa has applied tariffs of up to 25% since March. For many firms, this is an impossible burden to absorb without passing costs directly to consumers. Your Midday Sun Your noon-hour look at what's happening in Toronto and beyond. There was an error, please provide a valid email address. Sign Up By signing up you consent to receive the above newsletter from Postmedia Network Inc. Thanks for signing up! A welcome email is on its way. If you don't see it, please check your junk folder. The next issue of Your Midday Sun will soon be in your inbox. Please try again Article content Advertisement 3 Story continues below This advertisement has not loaded yet, but your article continues below. Article content In March, Canada became the only country other than China to retaliate against U.S. tariffs with counter-measures. This strategy, a holdover from the Trudeau era, was framed as a show of resolve against the 'tariff tyrant' in Washington. Some still defend it, but the evidence suggests cheaper, less painful options were available. While U.S. food inflation fell to 2.9% in July — three months after America's so-called 'Liberation Day' on April 2 — Canadian food inflation rose by 0.4 points from June. Nothing suggests this trend will reverse soon. Many expected U.S. food inflation to spike once pre-tariff inventories were exhausted. It didn't happen. America's larger, more productive economy, supported by diversified supply chains, absorbed the shock. Canada, one-tenth the size with far less flexibility, simply cannot. Advertisement 4 Story continues below This advertisement has not loaded yet, but your article continues below. Article content There's a reason only China and Canada chose to respond with counter-tariffs: Such policies weaponize the cost of living, but against one's own citizens. The July data confirm this. Canadian consumers are paying the price at the checkout. Meanwhile, Ottawa is collecting billions in tariff revenues. No information has been released about how much has been raised or how those funds will be used. Mark Carney, for his part, clearly understands how damaging grocery tariffs can be — which is why, since taking office, he has resisted adding new ones. Yet for many consumers, grocers remain the most visible target of blame. For Prime Minister Carney and his government, this reflex is politically convenient: it distracts from the true cost of tariff policy. But the reality is far more complex. One can only hope that the government will eventually level with Canadians and acknowledge how counter-tariffs at the grocery store hurt Canadian consumers, rather than clinging to the 'elbows up' mantra. The latest inflation numbers underscore the point. — Dr. Sylvain Charlebois is the Director of the Agri-Food Analytics Lab at Dalhousie University and co-host of The Food Professor Podcast. He is currently a visiting scholar at McGill University in Montreal. Article content Share this article in your social network Read Next
CTV News
4 days ago
- CTV News
Economists expect tariffs lifted food prices, core inflation in July
Statistics Canada is set to release inflation figures for July on Tuesday. A shopper pushes a shopping carts as they leave a Real Canadian Superstore in Ottawa on Tuesday, June 25, 2024. THE CANADIAN PRESS/Sean Kilpatrick OTTAWA — Tariff impacts are expected to keep underlying inflation elevated in July, a Desjardins economist says, even if the headline figure retreats. Statistics Canada is set to report inflation figures for July on Tuesday. A poll of economists expects annual inflation cooled last month to 1.7 per cent, according to LSEG Data & Analytics. June's consumer price index showed the annual rate of inflation ticked up to 1.9 per cent. Randall Bartlett, deputy chief economist at Desjardins, said he expects the headline inflation figure slowed beyond expectations to 1.6 per cent in July as lower energy costs continue to take steam out of price pressures. 'We're kind of expecting it to be a bit softer than what we saw back in June. So, from a headline perspective anyway, that's overall pretty positive news for Canadians,' he said in an interview. RBC is above the economists' consensus, expecting July's annual inflation reading will match the 1.9 per cent seen in June. Economists Nathan Janzen and Claire Fan wrote in a note to clients Friday that the removal of the consumer carbon price at the start of April 'continues to artificially lower headline inflation.' But they warned that price pressures below the surface should remain stubborn in July. 'Underlying trends have surprised upward this year, partly due to tariff impacts on products like food and vehicles, but also from higher prices for domestic services,' Janzen and Fan wrote. The Bank of Canada's preferred metrics of core inflation floated a bit above three per cent in June, according to Statistics Canada. Bartlett said Desjardins foresees these metrics holding between 2.5 per cent and three per cent for the rest of the year as Canada's tariff dispute with the United States drives up prices. He said he'll be looking to see whether more businesses were passing costs from tariffs onto consumers in July. Consumer price index data from the United States this past week appeared to show a tariff impact in the form of higher prices for shoes and furniture. While he believes the bulk of tariff price impacts were passed through in April and May, Bartlett said Canada will continue to feel the pinch from border levies on food and durable goods. 'That's going to put persistent upward pressure on price growth in Canada,' he said. The Bank of Canada held its benchmark interest rate steady at 2.75 per cent on July 30 as it waits for more information on how the Canada-U.S. trade dispute is affecting the economy. The summary of deliberations from that decision released this past week show the central bank's governing council remains wary of the effect of tariffs on inflation. Members indicated in those minutes that the impact on consumer prices 'appeared to be modest so far,' but the tariff influence is only just starting to show up in the data. While businesses' inflation expectations remain well-anchored according to recent surveys, the governing council said the costs of finding new suppliers amid shifting global trade could still push prices higher. 'Overall, members agreed that it was still too early to assess how tariffs and the rewiring of trade would affect economic activity and inflation in Canada,' the summary read. Bartlett said he expects economic data will open the door to a quarter-point interest rate cut at the Bank of Canada's next decision on Sept. 17. But that's contingent on core inflation readings getting back under control in the upcoming CPI releases for July and August. 'If we see that there's less passthrough from tariffs into inflation than we're expecting … we think there there's an opportunity for the Bank of Canada to cut further,' he said. This report by The Canadian Press was first published Aug. 17, 2025. Craig Lord, The Canadian Press
Winnipeg Free Press
4 days ago
- Winnipeg Free Press
Economists expect tariffs lifted food prices, core inflation in July
OTTAWA – Tariff impacts are expected to keep underlying inflation elevated in July, a Desjardins economist says, even if the headline figure retreats. Statistics Canada is set to report inflation figures for July on Tuesday. A poll of economists expects annual inflation cooled last month to 1.7 per cent, according to LSEG Data & Analytics. June's consumer price index showed the annual rate of inflation ticked up to 1.9 per cent. Randall Bartlett, deputy chief economist at Desjardins, said he expects the headline inflation figure slowed beyond expectations to 1.6 per cent in July as lower energy costs continue to take steam out of price pressures. 'We're kind of expecting it to be a bit softer than what we saw back in June. So, from a headline perspective anyway, that's overall pretty positive news for Canadians,' he said in an interview. RBC is above the economists' consensus, expecting July's annual inflation reading will match the 1.9 per cent seen in June. Economists Nathan Janzen and Claire Fan wrote in a note to clients Friday that the removal of the consumer carbon price at the start of April 'continues to artificially lower headline inflation.' But they warned that price pressures below the surface should remain stubborn in July. 'Underlying trends have surprised upward this year, partly due to tariff impacts on products like food and vehicles, but also from higher prices for domestic services,' Janzen and Fan wrote. The Bank of Canada's preferred metrics of core inflation floated a bit above three per cent in June, according to Statistics Canada. Bartlett said Desjardins foresees these metrics holding between 2.5 per cent and three per cent for the rest of the year as Canada's tariff dispute with the United States drives up prices. He said he'll be looking to see whether more businesses were passing costs from tariffs onto consumers in July. Consumer price index data from the United States this past week appeared to show a tariff impact in the form of higher prices for shoes and furniture. While he believes the bulk of tariff price impacts were passed through in April and May, Bartlett said Canada will continue to feel the pinch from border levies on food and durable goods. 'That's going to put persistent upward pressure on price growth in Canada,' he said. The Bank of Canada held its benchmark interest rate steady at 2.75 per cent on July 30 as it waits for more information on how the Canada-U.S. trade dispute is affecting the economy. The summary of deliberations from that decision released this past week show the central bank's governing council remains wary of the effect of tariffs on inflation. Members indicated in those minutes that the impact on consumer prices 'appeared to be modest so far,' but the tariff influence is only just starting to show up in the data. While businesses' inflation expectations remain well-anchored according to recent surveys, the governing council said the costs of finding new suppliers amid shifting global trade could still push prices higher. Monday Mornings The latest local business news and a lookahead to the coming week. 'Overall, members agreed that it was still too early to assess how tariffs and the rewiring of trade would affect economic activity and inflation in Canada,' the summary read. Bartlett said he expects economic data will open the door to a quarter-point interest rate cut at the Bank of Canada's next decision on Sept. 17. But that's contingent on core inflation readings getting back under control in the upcoming CPI releases for July and August. 'If we see that there's less passthrough from tariffs into inflation than we're expecting … we think there there's an opportunity for the Bank of Canada to cut further,' he said. This report by The Canadian Press was first published Aug. 17, 2025.
