Why Ontario's temporary HST rebate on new builds may not lead to hot housing market deals

Ontario plans to transfer HST on young homes for 1 twelvemonth

endure month the Ontario government announced plans to remove the Harmonized Sales Tax (HST) on new homes for one year, touting it as a measure that would “help families realize the dream of homeownership” and spur more home construction. 

The full tax rebate, which is included in the 2026 budget, would apply to buyers of eligible new homes valued up to $1 million. This would go beyond the tax rebate the province introduced last fall, which was only for first-time home buyers and only on the provincial portion of HST.   

Here’s what you need to know:  

Not until the budget gets passed. 

It is possible that details about the rebate and how it will roll out could change as the budget goes through the legislature.  

There’s also another caveat: federal legislation. Since this rebate would remove the full 13% HST on eligible homes, 5% of the HST comes from the federal government, and 8% from the province. 

That means there has to be changes both federally and provincially to implement the rebate.

Ontario, feds agree to scrap sales tax on new homes under $1M for a year

Benoit Mayrand, a spokesperson with the Department of Finance Canada, said the federal government is working on introducing a legislative change to account for the incoming HST rebate, with a new bill introduced last month. 

“Subject to passage, [the bill] would immediately provide $1.7 billion to provinces and territories to implement measures to increase Canada’s housing supply,” he said in a written statement. 

Mayrand said that Ontario has decided to use its allocation of the announced funding to implement the HST rebate, saying discussion about its implementation is “ongoing.” 

“As a result, we cannot speculate on potential timelines at this time,” he said. 

Some real estate experts say the rebate will be more of a bail-out for builders, not buyers. 

If the rebate only lasts for one year, it can give a “massive” bail-out to developers who have existing housing stock, said Mark Morris, a Toronto real estate lawyer. 

“All you’re really doing is allowing existing builders who have existing product to unload inventory,” he said. 

However, Morris also said the incentive can “reset” the market to benefit buyers, because if brand new builds — which are more desirable than older homes — are selling for less, the resale market will have to adjust its price points too. 

Ontario is far off its housing starts goal

Justin Sherwood, the chief operating officer for the Building Industry and Land Development Association (BILD), said most new homes are bought as pre-construction sales, and if an agreement of purchase and sale is made within the one-year HST rebate period, the rebate will apply even if construction ends later.

According to the Ontario government’s backgrounder on the rebate, if you plan to a buy a new home that isn’t built yet, you will get the rebate based on the following conditions: 

Requirements do differ depending on the type of home, so it’s best to check with provincial guidelines and an agent. 

You’ll have to do the math on where you can save the most, says John Pasalis, a realtor and broker with Realosophy Realty.

“[Buyers] might find that even with the tax cut, it doesn’t make sense,” he said. 

Pasalis referenced the condo market as an example where the benefit may be lost on buyers, because there is a big gap between what a resale condo costs and what a new condo build costs. 

“Even with a big tax cut, it costs way more to buy a pre-construction condo than an existing condo,” he said. 

“Why am I going to pay $800,000 for a pre-construction condo when I can get a very similar unit for $650,000 today?”     

However, when it comes to other types of housing — think townhomes, semi-detached or detached homes — Pasalis said it could make sense. 

“The only way is to just go to a new housing sales office and see what they’re selling, and at what price,” he said.

Hear why this economist thinks houses are still out of reach for young families

Because the budget hasn’t passed, there is no “discernible” guidance yet on how the rebate would be given out, said Morris. 

One possibility could include the builder claiming the rebate and taking it out of the cost of the home, meaning the buyer won’t have to pay for it in the first place or deal with any paperwork related to it. 

Another option could place the onus on the buyer to fill out an application to get the rebate through the Canadian Revenue Agency.   

Ontario's Ministry of Finance did not respond to multiple requests for comment about the rebate and when updated guidance will be made available.

You’ll likely have to go through a real estate agent/broker.

That’s because the HST doesn’t apply to resale homes, which are the properties listed on websites like Realtor.   

“There is no publicly available ability to look up new build products … you usually have to use an agent,” said Morris. 

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