How Much GST Relief Could Save First-Time Home Buyers

The Liberal government’s plan to exempt the GST on certain new-home purchases for first-time buyers could meaningfully affect housing affordability in Canada—though several important caveats remain, according to a new analysis.

Introduced on June 5, the proposed legislation would remove the GST from new home sales for first-time buyers on properties with an all‑in price up to $1 million, offering a potential tax reduction of up to $50,000 for qualifying new builds or substantially renovated units. For homes priced above $1 million, the GST relief would be phased out and eliminated entirely as prices approach $1.5 million.

Desjardins Economics, in a report published June 9, estimated that a first-time buyer of a new home with a tax‑included price of $1 million could see monthly mortgage payments reduced by around $240. The measure would also modestly lower the required down payment for such purchases.

GST break will reduce closing costs

Because some developers require buyers to pay sales tax upfront instead of rolling it into the mortgage, eliminating GST could lower the initial out‑of‑pocket closing costs for those purchasers.

“For these homes, eliminating the GST will help prospective buyers reduce upfront closing costs, helping them get their foot in the door sooner,” wrote Desjardins economist Kari Norman in the report.

The analysis suggests the effect will be particularly notable in Canada’s most expensive housing markets—such as Toronto and Vancouver—where new units frequently exceed the $1‑million threshold. Under the proposal, nearly 85% of new builds nationwide would qualify for the full $50,000 GST relief, Desjardins estimates.

Regional differences are important: Desjardins forecasts roughly 92% of new builds in Toronto would qualify for some level of tax relief up to the $1.5‑million phase‑out threshold, while about 75% of new Vancouver units would be eligible, because a significant share of Vancouver projects top out beyond the qualifying price range.

The new measure expands significantly on the existing federal New Housing Rebate, which is not limited to first‑time buyers but has long been capped at homes priced up to $450,000. To preserve the benefit’s value over time, Desjardins recommends indexing the qualifying price limit to inflation so affordability gains do not erode.

How much will the GST rebate cost?

The federal government has projected the rebate will cost about $3.9 billion over five years, while the parliamentary budget officer (PBO) has estimated a lower figure of roughly $2 billion for the same period. Desjardins notes this gap could reflect differing assumptions about how many new buyers will use the rebate and how strongly it will stimulate housing demand and construction activity.

The report cautions that the policy could spur higher demand for new homes, which might, in turn, encourage increased construction—but only if builders can overcome current industry constraints. Canada’s construction sector is contending with high financing and material costs, regulatory delays, an aging workforce and market uncertainty linked to trade tensions, all of which can slow delivery of new supply.

Desjardins also warns of potential unintended consequences. If developers anticipate stronger buyer demand and greater purchasing power among first‑time buyers, they may raise prices, labour costs or material markups, which would offset some or all of the intended affordability gains. Without concurrent measures to boost supply and speed up construction, heightened demand could push new home prices higher in the near term.

That said, the timing of the policy could offer targeted relief to segments of the market that are currently soft. Desjardins points to a weak condo market in cities such as Toronto, where increased buyer interest in new units could provide some support.

When does the GST break on new homes begin?

As of this writing, Parliament has not yet passed the legislation. The proposed relief would apply to qualifying homes purchased between May 27 and 2031. To be eligible, construction on those homes would need to begin before 2031 and be completed by 2036.

The GST exemption is part of a broader package of measures announced in the Liberal platform during the spring federal election campaign and is included in the same legislation as a scheduled personal income tax cut slated to take effect July 1.

Read more about home buying:

• Where to Buy Real Estate in Canada
• The complete guide for first‑time home buyers in Canada
• Buying your first home? Here’s how to get ready to make an offer
• Best FHSAs in Canada: Where to get the first home savings account
• What to do if your pre‑construction condo has dropped in value