Prime minister hopefuls are promising to lower taxes and fees to save up to $100,000 per new home in Canada’s biggest cities but that won’t help homebuyers in the GTA when there’s a glut of resale homes selling for significantly less.
In the GTA, it costs around $333,700 more to buy a new condo compared to a resale condo. While the price gap for condos is most evident in Toronto, there are also large differences in costs for single-family homes seen further out in the GTA in Brampton, Pickering and Oshawa.
Both the Liberal and Conservative parties have outlined measures such as cutting the five per cent goods and service tax (GST) on housing as well as reducing development charges to bring down the cost of new builds, to help “put home ownership back within reach,” Pierre Poilievre’s platform says, and lowering costs for Canadians to make “homeownership a reality,” Carney’s platform touts. But with the price of new builds significantly higher than resale homes, the measures can only go so far.
Narrowing the price gap between new and resale homes is near impossible, experts say, resulting in the vast majority of homebuyers purchasing in the resale market.
The proposed cuts will work as more of a tool to incentivize builders to build more at a time when the homebuilding industry is at a standstill, instead of alleviating prices for buyers. The belief is by eliminating or reducing these charges, it will cut costs for builders who will then reduce the price tag for buyers. Some experts say there’s no guarantee builders will reduce costs for consumers, while others say that in a down market builders will want to entice buyers with lower prices.
But given the significant price gap between new and resale, the policies might not lure buyers into homeownership in the new-build space as much as the federal party candidates say.
“The cost has surpassed any rational point,” said mortgage broker Ron Butler. “No average person can aspire to buying these new homes,” adding the proposed policies could be helpful for particular developments in smaller regions, but not in such expensive markets.
In the GTA, the benchmark price of a new single-family home in February was $1.53 million and a condo was $1 million, according to the Building Industry and Land Development Association (BILD). A single-family home includes detached, semi-detached, and townhouses (excluding stacked townhouses).
In February, the average price of a resale detached, semi-detached, and townhome in the GTA was $1.4 million, $1 million and $911,000, respectively. The average sale price of a condo was $688,000, according to numbers from the Toronto Regional Real Estate Board (TRREB).
It’s important to note there can’t be a direct comparison of new and resale home prices as the number of sales in resale far surpasses the number of new home sales per month, along with other factors.
In Brampton, the benchmark price of a new single-family home in February was $1.25 million and the average price of a resale detached, semi-detached and townhome was $1.16 million, $890,000 and $840,000, respectively. A new condo was around $795,000, and a resale condo was $470,000, resulting in a $325,000 difference.
In Pickering, the benchmark price of a new single-family home in February was $1.35 million and the average price of a resale detached, semi-detached and townhome was $1.16 million, $945,000 and $890,000, respectively.
In Oshawa, the benchmark price of a new single-family home was $1 million, and the average price of a resale detached, semi-detached and townhome was $860,000, $670,000 and $765,000, respectively.
The Liberal party has proposed to cut municipal development charges in half for multi-unit residential housing and work with provinces and territories to make up the lost revenue for municipalities for a period of five years. The Liberals say the estimated cost savings for a two-bedroom apartment in Toronto will be around $40,000.
The Liberals have also promised a GST cut, which is limited to new homes under $1 million for only first-time buyers (saving up to $50,000). “In recognition of the high costs of homes in more expensive housing markets,” they’ve also promised to lower the GST for homes between $1 million and $1.5 million for first-time buyers.
The Conservative party said on top of axing the five per cent GST for all new homes priced under $1.3 million for any buyer (saving up to $65,000), they will also incentivize municipalities to cut development charges for a total savings of $100,000 on an average home in the GTA.
Homebuyers pay a premium for a new home because they’re “move in ready,” but they have become more expensive post-pandemic, said David Amborski, a professor at Toronto Metropolitan University’s School of Urban and Regional Planning. However, the resale market has always been where the majority of sales are, he added.
A 2024 report by Toronto Metropolitan University found that 75 per cent of all GTA home sales are resale homes.
Interest rates, and material and labour costs have shot up over the last few years, meaning the cost to build has exceeded the market price, said Steve Pomeroy, a professor at the Canadian Housing Evidence Collaborative at McMaster University. He argued the cuts will spur housing but not necessarily change the price for homebuyers.
“The proposed development charge cuts are meant to get more projects built, it’s more of a supply effect than helping the consumer, as the price is already baked into the market,” he said.
There has been limited supply of purpose-built rental and multi-family homes, which the development charge reductions will incentivize, especially the Liberal platform which is directly focused on incentivizing multi-unit residential housing, Amborski said.
“We’ve fallen behind with this type of housing and it will help encourage more of this rental supply,” he said. “We need to keep our eye on the big picture which is we have a supply shortage which has lead to price increases, so if we can ramp up supply it will help mitigate significant price increases going forward.”
