Market Watch: How Ontario’s enhanced HST rebate is reshaping new-home demand 

After two weak years for new-home sales in the GTA, Ontario’s enhanced HST rebate is having a positive influence. Photo by Tyler Anderson/National Post

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With 2024 and 2025 being the two worst years on record for new-home sales in the GTA, Ontario’s enhanced HST rebate appears to be giving at least one segment of the market a jolt. 

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According to a recent report from the Building Industry and Land Development Association (BILD), the rebate “positively impacted” low-rise new-home sales in April, when they surpassed their 10-year average for the first time in three years. However, the broader new-home market remains sluggish. Total new-home sales reached 1,100 units in April, still 55 per cent below the 10-year average, while condo sales were 88 per cent below that benchmark.  

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Introduced on April 1, the rebate program temporarily lowers the tax cost of qualifying new homes bought before April 1, 2027. Eligible buyers can receive up to $130,000 in combined HST relief, with the full benefit applying to homes up to $1.5 million and phased down above that. 

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Here, Justin Sherwood, BILD’s chief operating officer, discusses why the rebate is moving buyers off the sidelines, why its early impact is stronger in low-rise than high-rise, and what the program could mean for future GTA housing starts. 

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This interview has been edited for length and clarity. 

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Q How meaningful is the HST rebate in practical terms to someone looking at a new home in the GTA? 

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Sherwood It does a number of different things for different people. For some, it puts a home that was out of reach into reach and allows them to potentially move from renting into home ownership. For others, it increases their purchasing power and means they can get more for their money. For others, it improves mortgage qualification and outcomes. 

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We’ve said this a number of times: It’s the most significant change in how homes are taxed since the GST was introduced. It’s the first time tax has actually gone down on homes since the GST was introduced in 1992. It’s a game-changer. 

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Q What does the rebate’s impact say about pent-up demand? 

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Sherwood It confirms that there is demand sitting on the sidelines, and if affordability measures are there, even if they’re time-bound and limited, they get people off the sidelines to buy. 

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It also tells you that new-home buyers have become very price sensitive. They’ve seen declines in new-home prices since the peak of 2022, and some people are wondering whether we are at the bottom. We are at the bottom, and we’ve been at a price floor for quite some time now. 

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Introduced on April 1, the rebate program temporarily lowers the tax cost of qualifying new homes bought before April 1, 2027. Photo by Peter J Thompson/National Post

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Q Beyond the HST rebate, what other policy tools could help improve affordability and supply? 

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Sherwood You saw another one announced recently, which is the details on how municipalities can qualify for a new $8.8 billion fund to help fund infrastructure in exchange for lowering development charges. 

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Traditionally, we used to say that 25 per cent of the price of a new home was composed of fees, taxes and charges. If you’re pulling the HST off and lowering development charges by 30 to 50 per cent, you’re making a meaningful impact in terms of supply and affordability. The two go hand in hand.