HST new-home rebate: these buyers stand to benefit from Ford and Carney's tax break

Owner-occupants and investors would get a full HST discount on newly built homes costing less than $1 million, and buyers could recover up to $130,000 for homes costing between $1 million and $1.5 million. The rebate would gradually decrease to $24,000 at $1.85 million.

Justin Sherwood, chief operating officer at the Building Industry and Land Development Association (BILD), said he believes anyone looking for a new home would benefit.

“You’re talking a full 13 per cent reduction on any (new) home under $1 million, so that would go from say, a $500,000 condo in the GTA all the way up to townhomes and any single-family homes that are available for less than $1 million,” he said.

“If you take a look at average housing prices in the GTA, this is firmly targeted toward the typical middle-class family buyer,” Sherwood added.

Last year was the worst year on record for new home sales in the GTA, according to BILD, with sales 63 per cent below the 10-year average and 100,000 jobs in Ontario projected to be at risk.

If the rebate increases sales, the industry would see more construction and jobs protected “at a time when there’s a lot of uncertainty and economic challenges,” Sherwood said.

Mike Moffatt, housing researcher and founding director of the Missing Middle Initiative, said he believes the rebate will have a greater impact outside of the GTA, “where prices are a little bit lower and market conditions are better.”

The expanded eligibility could benefit two groups in particular, he added.

One would be “second-time homebuyers” — young couples who bought a small condo more than five years ago and now want a family-sized home as they have children. Perhaps for them a new home has been “prohibitively expensive, they can’t qualify for a mortgage, or they’ve just been waiting on the sidelines,” Moffatt said.

The other group would be downsizing seniors — someone living in a large suburban home for whom moving into a smaller new-build home wouldn’t pencil out otherwise. “Having those home prices be, essentially, 13 per cent lower might incent some of them to move,” Moffatt said. (This could also, in turn, free up more family-sized homes for young families, he added.)

Toronto and Durham Region realtor Othneil Litchmore, however, doesn’t believe the rebate will be of much help to homebuyers for whom affordability is a major concern, but will instead be more beneficial to investors.

Most first-time buyers are buying in the resale market, where there is greater inventory, lower prices, and no HST, he said.

As such, their greatest challenge is saving up for the down payment and incorporating interest rates into their monthly carrying costs, he said.

“These sorts of rebates incentivize investors more than people who are thinking to occupy properties for their personal use,” Litchmore said. “Most first-time buyers, their math is much simpler like, ‘Can I carry it every month? Do I have enough for the down payment?’ When you start talking about taxes and stuff, that’s more like the sort of strategy and calculations that an investor makes.”

Beyond the yearlong eligibility time frame for all buyers, the first-time homebuyer who may benefit most from the rebate might be a first-time investor, he said, perhaps someone living at home in the GTA and buying an investment property farther away.

Moffatt said the rebate “should help level the playing field, and, in some cases, actually give a cost advantage to buying new over buying resale,” but he agrees that for some housing types in certain markets, “it might not be enough.”

For instance, he believes it will have a greater impact on single-family homes than on the struggling condo market, where “it’s going to be tough for even a 13 per cent reduction to create that level of cost competitiveness.”