A New GST Rebate For First-Time Buyers: A Closer Look at Canada’s Latest Housing Measure

Learn more about Canada's new GST policy.
Powered by Froala Editor

PUBLISHED ON May 29th, 2025

On May 27, 2025, the federal government announced a new GST rebate for first-time home buyers on new homes valued at up to $1.5 million. The measure promises to deliver up to $50,000 in tax relief for first-time buyers purchasing new homes and is expected to provide $3.9 billion in total savings for purchasers over five years.

What the Rebate Does and Doesn’t Do

The GST rebate applies to new homes up to $1 million, which are eligible for the full rebate, and to new homes priced between $1 million and $1.5 million, which receive a partial rebate that phases out linearly. It covers homes purchased from builders, co-ops, or those built by the owners themselves. For example, a first-time buyer of a new $800,000 townhome in Calgary would save $40,000; a first-time buyer in Ontario purchasing a $1.25m new home would save $31,250, as the rebate phases out linearly between $1 million and $1.5 million.

The goal is to reduce upfront costs for first-time home buyers. And for a segment of the population, it will. The policy excludes re-sale homes, which make up the large bulk of transactions in Canadian real estate and is where the majority of first-time buyers actually shop.

Who Benefits?

Beyond the immediate support for young buyers, several other groups stand to benefit.

Presale developers selling new homes up to the $1.5 million range now have a compelling marketing tool: buyers can claim a substantial rebate. This could increase demand for presales, and stimulate activity in the condo and townhouse markets. This demand-impacting policy could also help absorb the growing new condo inventory in cities like Vancouver and Toronto.

Builders and tradespeople may also gain from this policy. The rebate could help de-risk new housing projects and give developers more confidence to move ahead with construction, stimulating job growth and potentially increasing near-term housing supply.

The rebate also aligns with the federal government’s broader housing strategy, which includes a commitment to building 500,000 new homes every year. By making new home purchases more financially attractive for first-time buyers, this policy may stimulate developer interest and accelerate construction timelines. If effectively implemented, the rebate could become a catalyst for unlocking stalled projects and encouraging new builds–supporting both supply growth and long-term affordability goals.

The Bigger Picture: Housing Affordability Demands More

There’s no question that first-time buyers need support, still, some experts caution that a rebate focused only on first-time buyers risks being too narrow in scope. As noted by James Innis, President and COO of Sutton, in a recent STOREYS article, “While we applaud the effort to support younger Canadians looking to buy their first home, restricting eligibility to first-time buyers misses a large share of the market that’s also struggling.”

This echoes broader industry concerns that an inclusive rebate, such as one applied to all new home purchases, could do more to stimulate supply by expanding the buyer pool across multiple life stages and not just for market entrants.

At its core, Canada’s housing affordability challenges stem from a chronic undersupply of diverse housing types, restrictive zoning, slow permitting processes, labour shortages, high material costs, and investor-driven pricing pressures. While the GST rebate recognizes the challenges faced by new buyers and offers meaningful relief, it does not directly address the systemic barriers to new housing development. In fact, the incentive may drive demand before supply has time to catch up, particularly in high-pressure urban markets.

Our Take

At Sutton, we’re encouraged by measures that support Canadians on their path to homeownership. Long-term housing affordability, however, will depend on sustained efforts across multiple areas of the market.

Expanding zoning to allow for more townhomes, duplexes, and mid-rise buildings in urban centres can help increase supply and create more diverse housing options. Additional support for purpose-built rental housing, along with targeted programs for lower-income households, will also play a key role. Strategic investment in infrastructure that connects new communities to employment and services will ensure that growth is inclusive, sustainable, and well-supported.

Final Word

If you’re a first-time buyer, this rebate may offer meaningful savings, and it’s worth exploring whether you qualify. But for the housing market to truly become accessible, we need more than tax relief. We need vision, coordination, and the political will to tackle the root of the problem.

Sutton remains committed to championing that broader conversation and to helping Canadians navigate both the opportunities and the challenges ahead.