Will HST cut on new homes save buyers money? Early look finds 78% of prices are the same or higher

On March 25, the Ontario government announced an HST rebate for all new home buyers for up to one year. The new tax rebate maxes out at $130,000 for homes costing between $1 million and $1.5 million and then gradually drops to $24,000 at the $1.85 million threshold. (That $24,000 rebate has been on the books for the past 15 years or so.)

An early look shows that the majority of developers have kept prices for preconstruction units unchanged, with a significant minority dropping prices since the government announcement. 

Of the 1,000 floor plans analyzed, 22.3 per cent experienced price reductions from March 15 (pre-HST announcement) to April 15 (post-HST announcement), while 8.4 per cent saw price increases and 69.3 per cent remained unchanged. For developers that have yet to drop prices it doesn’t mean buyers won’t receive the rebate, they might just be waiting until the proposed government policy is passed in the legislature.

“What our data shows is that Ontario’s new construction market is already repricing downward in practice, even if it doesn’t always look that way on paper,” said Daniel Foch, chief real estate officer of Valery.ca and report author.

“Explicit price cuts are outnumbering increases, most supposedly unchanged units are still effectively cheaper because of the GST/HST rebate.” 

The measure is touted as a way to improve sales for builders by helping them lower prices for buyers, while some criticism has focused on whether builders will absorb the rebate by raising prices or by not passing on the savings.

While the data shows few builders raising prices, one legal expert warns many buyers historically have not received the benefits of the existing HST rebate. 

New-build freeholds see biggest price drops

The analyzed floor plans show that lowrise floor plans (single-family homes) are seeing greater price reductions compared to highrise (condos). 

More than 40 per cent of three-bedroom and four-bedroom floor plans have seen price reductions since the HST announcement. 

“We’re still in the very early stages but the lion’s share of activity and conversations that are happening are in the lowrise sale centres in the GTA,” said Ryan Rabinovich, founder of Rare Real Estate, a real estate development firm based in Toronto. 

“Investors have still not come back into the market. The conversations that are happening are very much with end-users: young families, first-time home buyers, downsizers, multi-generational families that are looking for a little bit more space.”

Because the expanded HST rebate is active for a year (purchase agreements must be signed between April 1, 2026 to March 31, 2027) and construction for primary residences must begin by Dec. 31, 2028, and be substantially completed by Dec. 31, 2031, it’s easier to find single-family home projects that fit into this timeline, Rabinovich said. 

“That’s why buyers are poking at preconstruction again with completion timelines of anywhere between six to 18 months,” he said. A highrise condo typically takes three to five years to complete. 

Will the HST rebate be passed on to buyers? 

David Meirovici, partner at Meirovici Zywot LLP, a real estate and corporate law firm, says historically, the purchase agreements between the buyer and developer has the buyer assign the rebate to the developer.

Because of this, it’s difficult for a buyer to know if the price has been inflated to account for the rebate.

Standard agreements “almost universally, they say that you, as the buyer, agree to assign the builder all your rights and entitlements to the HST rebate with a promise not to apply for them on your own. So the buyer doesn’t get the rebate, the builder gets it,” Meirovici said.

“We know from history with the existing $24,000 rebate that the buyers were not receiving these funds as builders just said they were factoring that savings into the price,” he said, noting buyers who did not qualify for the savings would have to pay the rebate amount on top of the purchase price. 

With the proposed expanded HST rebate — which is still not law — if a new home costs $1 million, buyers can’t bank on receiving a $130,000 cheque from the government unless their agreement specifically allows them to apply, he said. 

“Even so, it would be surprising for the builder to not keep the historical $24,000, lowering the possible entitlement to $106,000,” he said. “Otherwise we can only hope that builders begin to offer properties at discounts equal to the rebate.”

Whether the buyer benefits from the rebate comes down to the contract, which Meirovici warns “have always been very favourable to the builder.”

“Both then and now, there’s likely no way for a buyer to really know if that is the case or whether the purchase price is still just a factor of the market, rebates or not.”

‘First step forward to stabilizing the condo market’

Ultimately, it’s up to the discretion of the developer how much they decide to lower the final price tag for the buyer, but experts say and the data suggests that for developers to be competitive and attract more sales they have to lower prices.

 Shaun Hildebrand, president of real estate research firm Urbanation, said the policy is “interesting” but won’t immediately improve the presale market. 

“Ultimately it’s the first step forward to stabilizing the condo market, which is what we need at this point.” 

Before the HST rebate announcement, developers were already lowering prices to attract sales. Now with the rebate, they can offer even more meaningful savings for buyers, Hildebrand said.

The average asking price for a completed unsold condo is $1,189 per square foot, which is down five per cent compared to a year ago, and nine per cent over the last two years, he said. 

The lower prices can attract more sales to help ailing projects get to the finish line, he added.