GST Eliminated for First-Time Homebuyers: What It Means for You

The Canadian real estate market has only recently experienced a drastic shift! Prime Minister Mark Carney has announced that the Goods and Services Tax (GST) charge on first-time purchasers of new or substantially renovated homes costing $1 million or less will be eliminated to make buying a home more affordable.

This project can save the purchasers up to $50,000, providing significant financial relief. Moreover, there will likely be increased incentives for further housing developments, resulting in increased home supplies in places with high demand, such as the Greater Toronto Hamilton Waterloo Area (GTHWA).

Understanding the GST Elimination

The removal of GST is a targeted plan to assist first-home buyers who are traditionally tight on money when buying their first home. With this action, the government aims to reduce the expense of entry into homeownership as an attainable reality.

The policy focuses on newly built and comprehensively renovated houses worth $1 million or less. The eligible renovations under this program typically involve radical structural changes or conversions of non-residential buildings into residential ones.

This tax relief is likely to place money directly into the hands of purchasers, alleviating some of the cost burdens of down payments and closing.

Key Benefits of the GST Elimination

The elimination of the GST on qualifying homes offers multiple advantages:

Direct Financial Relief: First-time buyers could save up to $50,000, reducing their financial strain.

Increased Housing Supply: Developers may be incentivized to build more homes, contributing to a healthier housing market.

Boost to Homeownership Rates: Lower costs may encourage more renters to transition to homeownership.

Enhanced Market Stability: The expected rise in construction projects can generate employment and economic growth.

Impact on Southern Ontario Real Estate

Southern Ontario, including Toronto, Hamilton, and Kitchener-Waterloo, is one of Canada's most expensive real estate markets. However, the GST reduction could bring massive value to the region.

Current Market Overview

According to recent market data from March 2025:

• Toronto: Average home price - $985,653 (+2.7% YoY)
• Hamilton: Average home price - $757,071 (-4.8% YoY)
• Kitchener-Waterloo: Average home price - $755,859 (-0.8% YoY)

Removing GST will decrease the upfront cost to consumers, potentially increasing demand. While this would have gentle upward pressure on price, policy stimulus to new construction can neutralize this, resulting in long-run price stability.

Encouraging Housing Development

A critical aspect of the GST elimination policy is its expected role in encouraging developers to accelerate construction projects. By eliminating GST on qualifying sales, developers may find pre-construction homes more attractive to buyers, leading to quicker sales and increased funding for new projects.

Key Outcomes for Developers and Builders:

• Greater confidence in announcing residential projects.
• Higher chances of pre-construction sales.
• Enhanced financial viability for affordable housing projects.

This rise in construction activity can counter the present deficit in housing supply, moderate upward pressure on housing prices, and provide more choices for buyers.

Steps for First-Time Homebuyers

If you are a first-time buyer considering purchasing a home under this policy, follow these essential steps to maximize your benefits:

• Confirm Your Eligibility: Ensure that you meet the requirements for this tax cut. You must be a first-time homebuyer purchasing a new or substantially renovated home valued at $1 million or less.
• Get Pre-Approved for a Mortgage: With increased demand, securing a mortgage pre-approval is crucial. It lets you determine your budget and lock in a favourable interest rate.
• Work with a Real Estate Professional: A licensed real estate agent can help you navigate the market, identify suitable properties, and negotiate effectively.
• Stay Cautious of Scams: Unfortunately, increased buyer activity may lead to a rise in fraudulent schemes. Stay vigilant by verifying property details, working with certified professionals, and avoiding offers that seem too good to be true.

Long-Term Effects on the Housing Market

While the short-term effect of this GST cut will likely be a surge in first-time buyer activity, the long-term impact depends on various factors. Increased construction activity could gradually balance supply and demand, stabilizing prices.

Additionally, as developers build more properties to meet the heightened demand, cities may witness enhanced infrastructure development and job opportunities in the construction sector.

Is Now the Right Time to Buy?

Eliminating GST appeals to first-time purchasers, particularly those in strong markets like Southern Ontario. However, it is crucial to consider personal financial readiness, interest rates, and trends before jumping in.

To get personalized recommendations, attempt to engage with experts like Royal Canadian Realty to make informed choices.

Conclusion

The phase-out of GST on first-home buyers is a significant step forward in making Canada's housing more affordable. Reduced initial costs and spurring new residential development are expected to have ripple effects throughout the real estate market. First-home buyers can save heaps, and developers face more substantial building incentives, bridging the housing availability gap.

If you consider taking advantage of this promotion, today is an excellent day to discover opportunities. Contact us at Royal Canadian Realty for expert guidance and personalized support in achieving homeownership.